Preamble

The House met at half-past Nine o'clock

PRAYERS

[MADAM SPEAKER in the Chair]

Rural Policies

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Betts.]

Mr. Richard Spring: I am most grateful to you, Madam Speaker, for giving me the opportunity to introduce the debate. I am grateful also to the Under-Secretary of State for the Environment, Transport and the Regions, the hon. Member for Wallasey (Angela Eagle), for being in her place to reply on behalf of the Government. It shows the real concern that so many hon. Members have for the future of rural areas that so many are in the Chamber this morning.
On 9 February 1996, in a joint letter to The Times, the then Prime Minister, the Leader of the Opposition and the leader of the Liberal Democrats wrote as follows:
On one subject we speak with a united voice—namely in advocating the protection of our countryside in its rich personality and character.
Regrettably, less than 18 months after that optimistic letter was written, that consensus is falling apart.
Only last week, more than 100,000 people came to Hyde park because they believe that the rural way of life is now at risk. They did not attack policemen, they did not burn cars and they did not shout abuse; they were restrained and good humoured. Nevertheless, their anxieties were genuine and heartfelt.
The chief executive of the British Field Sports Society explained:
the countryside is waking up to the fact that this Government has an urban majority that doesn't understand or, indeed, represent rural interests. Countrymen can no longer afford to be complacent; they need to put their heads above the parapet and be counted. The urban majority must listen to the voice of the countryside before it is too late.
Over a period, some of those who sought a rural way of life have felt to some extent marginalised. The issue has now come forcefully to a head, however, with a new Government who are clearly bent on institutionalising urban-based political correctness. We have a Government who are dedicated to destroying country sports, which are an integral element of country life from both social and economic points of view.
The United Kingdom is one of the most urbanised countries in Europe, and that is especially true of England. There is hardly a place in this country that would not fall within city limits if it were in the United States. Hardly a farm is more than 30 miles from a major town or city.
For many, commuting has become a way of life. Increasing accessibility has fundamentally changed the relationship between town and country.
It is forecast that the number of households in England and Wales will increase by 4.4 million by the year 2010, and many of those people will wish to settle in the countryside. Pressures on space and services are causing considerable alarm among those already living in the countryside.
There is, however, considerable potential for redeveloping existing urban areas. It is up to the new Government to decide how to implement the Environment Act 1995 in relation to the so-called brown-field sites. I hope that the Minister will give some clear signs this morning, because many in the rural areas believe that there is unacceptable pressure for new developments on green-field sites.
In 1995, my right hon. Friend the Member for Suffolk, Coastal (Mr. Gummer), when Secretary of State for the Environment, published a comprehensive White Paper entitled, "Rural England—A Nation committed to a Living Countryside". I applaud him again for that initiative. The White Paper began by declaring the countryside to be a national asset. It went on to outline the ingredients for sustainable development, such as meeting the economic and social needs of people who live and work in rural areas, conserving the character of the countryside while accommodating necessary change, and improving the viability of existing villages and market towns.
Yet something has clearly gone wrong. Many rural dwellers have already lost confidence in the new Government's desire and ability to protect their interests. Sadly, I believe that their fears are justified. We know that 13 million people live in the countryside or in small towns. These 13 million share exactly the same hopes, aspirations and concerns as everyone else about housing, transport, law and order, jobs, schools, health and recreational activity. But there are essential differences, because of remoteness and small scale, planning and transport differences, and the desire of many to enjoy fully the recreational opportunities of country living.
Even in rural counties such as Suffolk, the bias in service provision is manifestly towards the urban parts of the county. My right hon. and hon. Friends will confirm exactly the same situation in Labour-controlled local government throughout the country.
The Government's precise view of the future of local government is unclear. May I directly tell the Minister that the prospect of yet another tier of administration in rural areas is deeply unwelcome? The mentality of urbanisation that exists in the Labour party threatens the proper administration of our country way of life.
Regional assemblies are bound to be based in towns and cities and take powers away from parish and local councils in rural areas. The previous Government sought to enhance the powers of parish councils. Now, my constituents are in a state of limbo about the Government's plans for the administration of country areas. They are fully entitled to some clarity.
Suffolk county council, for example, while for ever reciting the "lack of resources" mantra, has given, effectively, an open cheque book commitment to an expensive park and drive scheme in the city of Ipswich. Yet, disgracefully, I cannot even get a much-needed


footpath built in a rural village in my constituency, allegedly because there is no money. Similarly, lorries shatter the peace of rural villages because local authorities will not give urgent and sufficient priority to properly co-ordinated lorry management schemes, which are very much required.
Let us look at employment, which, as in the rest of the country, has been a considerable success story. One of the most disappointing features of the new Government is the way in which they are fundamentally failing to understand the increasingly fragmented nature of our economy. Apart from the agricultural sector, throughout the country there are thousands of people with offices in their homes, in rural cottages or converted barns, linked to their main offices or customers via the telephone, fax, Internet and e-mail. They may go to an office in a city only once or twice a week. Much of that activity is highly creative. It suits modern life styles. It is flexible. Some people may wish to work only part time.
We saw in the 1980s the massive job downsizing in large companies. Workplace fragmentation and the growth of outsourcing have flowered in this country. Now, bluntly, that is at risk. Having given away our employment rights when we signed up to the social chapter, we shall inevitably be at the receiving end of employment directives that will kill off this highly successful evolving process.
The European social and economic model is an employment disaster. The huge rural depopulation of France illustrates that clearly. The imposition of a minimum wage coupled with job-destroying directives will play havoc with the rural economy.

The Parliamentary Under-Secretary of State for the Environment, Transport and the Regions (Angela Eagle): Will the hon. Gentleman admit that the only places in Britain where there is a minimum wage are rural areas, because the Conservative Government failed to abolish the agricultural wages councils?

Mr. Spring: I am afraid that the hon. Lady entirely misses the point. There has been a diversity of economic activity and job creation away from the agriculture sector in rural areas precisely because there is not the sort of regulation that has destroyed employment in rural areas in countries such as France. I am astonished that she fails to understand that.

Mr. lan Bruce: It is always interesting when Ministers come to the Dispatch Box so badly briefed about the minimum wage. The agriculture wages council—

The Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food (Mr. Elliot Morley): It is a board.

Mr. Bruce: The agriculture wages board, which is an exact model of what the Government want to bring in, has a minimum wage of £2.95. It would be nice to know from the Minister whether £2.95 will be the national minimum wage.

Mr. Spring: My hon. Friend is quite right. Perhaps the hon. Lady is not aware that there are many jobs other than farming that sustain the rural economy. Clearly, she is utterly ignorant of that fact.
Most businesses in rural areas employ fewer than 20 people. The most helpful thing that the Government could do to enable them to compete is to cut business rates, as we promised in our manifesto. Already, rate reliefs are available for village shops and post offices. They do not want to see a return to the local control of business rates by local authorities, some of which are instinctively anti-business. They do not want to be beholden to local authority officials whose ability to gold plate European health and safety legislation is legendary. Regrettably, the only policy that the Government have so far announced is the statutory right to interest, which was opposed by the overwhelming majority of small business organisations.
Rural areas need a balanced transport system. The imposition of new so-called green taxes in the latest Budget has had a particularly damaging effect on rural car users. It is to be hoped that the privatisation of our rail services will mean a more effective and balanced challenge to road hauliers. However, any sense of urgency so far is lamentably lacking. In my constituency, the A11 is a death trap and the Elveden crossroads truly life-threatening.
Valiant efforts have been made by interested parties, with considerable success, to resolve these problems co-operatively. I sought the help of the new Minister for Roads simply to bring this all together, only to be told that the whole roads programme was indefinitely under review. There appears to be nothing that is not under review. It is ludicrous that, after Labour waiting 18 years to get back into government, crucial decisions affecting our lives remain in suspended animation. People in rural areas have a right to know what transportation policies will be pursued.
On the subject of reviews, may I also tell the hon. Lady of the very real anxiety of many of my constituents following the announcement of the Secretary of State for Health that hospitals would close? In rural areas, there has been a dramatic improvement in the provision of primary health care through GP fundholding. Now we are, apparently, to have a fresh upheaval in the NHS with the creation of a new bureaucracy called locality commissioning groups.
I very much regret the closure of many smaller acute care hospitals over the years. Because we do not know what is happening, and there is a review, there is fear among GPs, nurses, doctors and patients that medium-sized acute care hospitals will close, too. In rural areas, that would be a catastrophe. Patients would have to travel miles to hospital or to receive visits from family and friends. It removes the essential linkage between local communities and their hospitals.
There is genuine concern that the West Suffolk hospital, in Bury St. Edmunds, which serves most of my constituents, will be closed, so let me spell it out clearly. If the Government decide that, to save money and further appease their urban supporters, they will concentrate acute care facilities in a very limited number of giant hospitals—if acute care health services are remorselessly centralised—there will be far more than 100,000 people protesting in the rural areas about the future of their health services.
Our farms are not theme parks to be trampled over at will by outsiders. There is a balance to be achieved. All hon. Members will applaud the efforts made by the


Country Landowners Association in its Access 2000 statement issued last May. Much voluntary progress has been made. I very much hope that the Government will work constructively with local authorities, landowners and countryside users for sustainable access. We must not create some statutory right to roam, and never again should we witness the horrific activities of so-called new age travellers, who had nil respect for the countryside, its inhabitants or its wildlife.
There are many other areas of rural life that I should like to touch on. I am sure that my hon. Friends will do so if they are fortunate enough to catch your eye, Madam Speaker. The 1995 White Paper brought together the rural aspects of all Government policies for the first time. May I therefore ask the Government to commit themselves to a similar integrated approach to rural policy so that the uncertainties that I have spelt out can be dealt with?
Last week, in Hyde park, we witnessed a defining moment. The catalyst was the private Member's Bill that seeks to ban country sports, particularly fox hunting. Marchers came to Hyde park from Scotland, Wales and Cornwall. The Bill makes a clear distinction, albeit a spurious one, between fishing and field sports. Somehow, it is entirely legitimate and not cruel to stick a barbed hook in a fish's mouth, play with it in the water, land it and watch it suffocate. At least, that is how some might interpret the situation.
No one disputes the fact that foxes are predators whose numbers must be controlled, but, under that private Member's Bill, it would be acceptable for vixens and their cubs to be gassed in their lairs, and for foxes to be snared only to die slowly and painfully and to be shot at with the risk of injury. All those practices may well happen, but allowing a fox to be killed instantly in the jaws of a foxhound would not be acceptable.

Mr. Morley: For the record, let me point out that gassing foxes is illegal in this country.

Mr. Spring: I appreciate that, but, although it is illegal, it is—regrettably—known to happen. The culling of foxes is a particular problem for farmers. If fox hunting were banned, we might just see an upsurge in such activity, which would be thoroughly undesirable.
The former executive director of the League Against Cruel Sports, Richard Course, observed:
When I became fully and objectively appraised of all facts, and conversant with all related arguments, it was impossible to avoid the conclusion that the prosecution of the anti-hunt case would not advance "fox welfare" and consequently could not be justified.
I dwell on the subject because the importance of fox hunting is essentially twofold. As the New Scientist put it on 19 April 1997,
Foxhunting has helped shape the British landscape. Areas where it is common often have more hedgerow and thicket which benefit other wildlife besides the fox. These would disappear if hunting were banned.
Fourteen thousand acres of woodland are owned or managed by hunts, and 95 per cent. of hunts undertake conservation work—the maintenance of bridleways, gates and so forth—while 1.4 million carcases are disposed of each year, either free of charge or at minimum cost. Hunting is an essential part of the traditional life of the countryside and has considerable economic significance.
There are 385 registered packs of hounds and 228,000 participants in registered packs and clubs. The 1997 update of the Cobham report estimated direct employment at 15,300 and direct expenditure at £176 million, with a turnover of £122 million involving 9,700 separate businesses. Five thousand pubs are patronised for hunt meets and other fixtures. The hunt is a broadly based social activity, often taking place in remote country areas: it is a way of bringing people together. Seventy per cent. of all woodland planting on English and Welsh farms is for sporting purposes.
Earlier, I tried to express the concern of rural dwellers about such matters as the rural economy, transport, health services, access and so-called green taxes. That concern, however, is merely a backdrop to the exploding sense of alienation from the urban-based, politically correct values that are clearly hallmarks of the present Government.
This is a matter of fundamental principle. No one can deny the right of anyone in our democracy to dislike fox hunting, to argue against it, to ignore it or even to find it repulsive. It is wholly different, however, when that right is translated into the punishment of those with whom such people disagree—their punishment as criminals.
How would the law be enforced when a farmer sought to cull foxes, and tried to flush them out with his dogs? Would that be a criminal activity? Where is the line to be drawn? Foxes are predators: they kill for the sheer pleasure of it. Savagely tearing the limbs off lambs and decapitating chickens, ornamental ducks or even swans has nothing to do with the need to eat. Yet we return to the same principle: should the state have the right to punish someone for his activities simply because the majority find them distasteful, and, in so doing, to have a severe impact on the economy of rural areas?
Last year, 3.3 million people went fishing and more than 700,000 shot game and wild fowl. Annual direct expenditure on country sports runs at £3.8 billion and has provided more than 60,000 full-time jobs. Indirect expenditure totals £2.4 billion and has provided 31,000 jobs. Government income runs at more than £600 million.
In our urbanised society, nature has become entirely removed from what we eat. It is a kind of carnal disembodiment. Butter and milk bear no relation to cows; eggs bear no relation to chickens; and chickens bear no relation to feathers. What is really repulsive is the way in which our new politically correct elite decides, in an inconsistent, illiberal and intolerant way, what is good for us all. Rural Britain is patronisingly viewed as some kind of Disney theme park.
When the sensitive luminaries of Islington, Hampstead and Highgate sit down to eat, the only thing that is wild about the poached salmon is the price. For them, a visit to the countryside all too often means a visit to a luxury health hydro, where they can "de-stress" after all the exhausting intellectual gymnastics of what they have decided is and is not currently politically correct.

Dr. Julian Lewis: My hon. Friend has set out a great many facts and figures for the record, and for the edification of Labour Members. Should we not also record the fact that fewer than half a dozen Labour Back Benchers have bothered to attend the debate?

Mr. Spring: I thank my hon. Friend for making that point, which is at the heart of the debate. Rural issues cannot be distinguished from the mainstream of British life; they are part of the nation. The contempt with which the Government are treating rural areas is, however, manifest in the number of Conservative Members who are present.
There is a serious point to be made, to which my hon. Friend has alluded. A substantial part of our population should be allowed to continue a way of life that is currently under threat. This is not only about hunting, but about all the activities that are linked with it: gymkhanas, horse trials and point-to-points. Those who despise the rural life will inevitably go after shooting as well. Not only would the whole rhythm of country life be affected by such moves, but trees, fences and hedgerows would soon be at risk.
Before the general election campaign, the Prime Minister declared his desire to lead one nation. He talked of the community and of social cohesion, and the electorate responded. Only weeks after the election, however, the uncertainties that had already stirred in rural Britain have been translated into real fear and anxiety. The Government's policies so far appear to be at worst hostile, and at best irrelevant, to the needs of rural Britain. I hope that the Prime Minister will not go down in history as the first Prime Minister to cause an irrevocable and damaging split between the rural and urban parts of our nation.
We have had a rocky start from this Government. I urge the Under-Secretary of State for the Environment, Transport and the Regions to listen carefully to the concerns of people living in the countryside in the years ahead. They are entitled to the same consideration as everyone else. They are entitled to a policy framework and services adjusted to their needs, and should not to be treated as second-class citizens.

Mr. David Hanson: I appreciate the opportunity to contribute to the debate. I congratulate the hon. Member for West Suffolk (Mr. Spring) on securing the debate, although I disagree with almost everything that he said. I represent a rural constituency and I won that seat from the Conservatives in 1992. My hon. Friends the Members for Forest of Dean (Mrs. Organ) and for Stroud (Mr. Drew) are present. They won seats from the Conservatives in the recent general election. Many Labour Members speak for rural areas. Conservative Members do not represent as much as a single tree or field in Scotland and Wales.
The Conservative party is not the only party which speaks for rural Britain. The Labour party achieved its highest-ever vote in rural areas on 1 May. We wiped out the Conservatives in rural Scotland and rural Wales. Many of my hon. Friends speak in the Chamber and run the country on behalf of rural Britain as a whole.
I hope that the debate will focus on positive points. In the spirit of cross-party co-operation, I say immediately that I welcomed much of what the previous Government did to recognise the needs of rural areas. I welcomed the proposals in the White Papers for rural Scotland, Wales and England. I welcomed the fact that "Rural England" was produced by the previous Government, and I recognise that the document "Working Countryside for

Wales" was important. However, the debate should be put in the context of the Conservative Government's performance on rural issues.
I should like to draw Conservative Members" attention to the Environment Select Committee's report on rural England, which highlighted problems that the Conservative Government had caused and which they had to face in the previous Parliament. Their documents proposed a certain strategy, but the Environment Select Committee's report highlighted rural poverty, the need to sustain market towns, the removal of large tracks of woodland and the need to develop key targets to achieve improvements in rural areas, which the previous Government failed to do.

Mr. Nicholas Soames: We all share the aim of removing rural poverty, as the hon. Gentleman calls it. Does he truly think that the introduction of a minimum wage will contribute to removing rural poverty? In an interview during the general election campaign with the distinguished journalist from The Sunday Times, A. A. Gill, the present Deputy Prime Minister, with welcome candour, said that the introduction of a minimum wage was likely to increase unemployment.

Mr. Hanson: I strongly support a minimum wage. During the general election campaign, many of the people who work in the rural parts of my constituency supported a minimum wage. Many of the farmers in my constituency, who are legion, lobbied me strongly when the Conservative Government tried to abolish the agricultural wages boards. Farmers and people in rural areas in my constituency recognise the need for an inclusive society in which everyone has a stake and in which people are part of the businesses in which they work.
One of the things I am most looking forward to in this Parliament is the establishment of a low pay commission, so that people in rural and urban areas can contribute to the decision on a reasonable level for the minimum wage. That will ensure an end to some elements of rural poverty in our communities.
We have had 18 years of Conservative government and 18 years of their stewardship of rural areas. The hon. Member for West Suffolk knows my constituency well and is a frequent visitor. He is aware that many rural areas have suffered dramatically under Conservative rule. Rural crime has risen. I could show the hon. Gentleman the former police stations in the rural areas of my constituency that were closed by the Conservatives. I could take him to see many of farmers and rural constituents who have suffered dramatically from rural crime. Dyfed Powys police have organised a conference next week at the Royal Welsh show to highlight the issue of rural crime. It is an important matter, and the Conservative party failed to deal with it during their stewardship of the rural community.

Mr. Keith Simpson: Do the Government intend to reopen those police stations in the hon. Gentleman's constituency?

Mr. Hanson: The Labour Government will put resources into policing to ensure that we reduce crime. There is a difference between removing police stations


and reducing rural crime cover, and examining that issue in the light of the damage done by the previous Government. We will put resources into policing to ensure that rural as well as urban areas are covered.

Mr. James Paice: Will the hon. Gentleman give way?

Mr. Hanson: In a moment. There is a limited amount of time, and many hon. Members want to speak.
With regard to transport, 33 million bus journeys per year were lost in Wales thanks to rural bus deregulation. On housing, we have had inappropriate planning policies, many planning appeals have been allowed and council house building has been prevented, thus reducing the number of affordable homes in rural areas. Great damage has been done on a range of issues as a direct result of the Conservative Government's policies.

Mr. Paice: Bearing in mind the fact that the Chancellor of the Exchequer has already confirmed expenditure policies for the current and the next financial year, will the hon. Gentleman tell us how much extra money will be spent on rural policing over and above that which the previous Government announced?

Mr. Hanson: The Chancellor has said that the target limits for the next two years are the same, but the priorities within them will be reviewed. A fundamental and comprehensive spending review is being undertaken, which will examine levels of spending and what has been done. We should also consider the key issue of crime prevention in rural areas to ensure that we reduce crime. The Government will improve on the previous Government's performance in many aspects of policy.
The hon. Member for Mid-Sussex (Mr. Soames), who has now left the Chamber, referred to wage levels. The Conservative Government launched an assault on the agricultural wages boards and tolerated rural low pay and rural poverty. I look forward to the establishment by the new Labour Government of a minimum wage and positive policies to tackle those issues.
The previous Government's record on education was appalling. The main concerns in my constituency during the previous Parliament were nursery vouchers and the potential for selection in schools, both of which had a dramatic effect on rural areas. If there is selection and if there is only one major school in a nearby town, many rural people will require additional transport to get their children to school. The rejection of the nursery voucher scheme in Wales was overwhelming in rural areas. The vast majority of petitions that I received from rural areas during the previous Parliament were about nursery voucher provision. The Conservative Government's education policies did great damage to my rural constituents.
People in rural areas are concerned about the removal of shops and pubs. The possible privatisation of the Post Office caused great fear in rural communities. The sell-off of woodlands and the destruction of hedgerows were part of a range of policies that the previous Government followed, and I hope that the Under-Secretary of State for the Environment, Transport and the Regions, my hon. Friend the Member for Wallasey (Angela Eagle), will address those problems.
There is also the farm crisis fiasco of BSE, which has cost billions of pounds of taxpayers' money and has destroyed many rural incomes and rural communities. It has put great pressure on the people whom some Conservative Members purport to represent.
One reason why there are 164 Conservative Members and 418 Labour Members is the previous Government's failure—[Interruption.]

Mr. Deputy Speaker (Mr. Michael J. Martin): Order. There is much shouting in the Chamber. Hon. Members should not try to shout down the hon. Gentleman because he expresses an opinion with which they do not agree.

Mr. Hanson: Many of my hon. Friends are out running the country, which is why they are not here at the moment.
The BSE crisis had a tremendous impact in rural areas. I should like to see some key policies put into practice in the countryside. We must look at economic prosperity to see how the Government can encourage small and medium-sized businesses to develop.

Mr. John Bercow: Will the hon. Gentleman give way?

Mr. Hanson: Time is pressing. I have given way a number of times and I must make progress so that other hon. Members may have an opportunity to speak.
I want economic renewal in rural areas. The hon. Member for West Suffolk spoke about information technology. I hope that the Government will extend information technology services and encourage them in many parts of rural Wales, especially in my area. The hon. Gentleman spoke about the important issue of developing rural communities and businesses. The Government should support a modern reappraisal of IT and put some effort and resources into it.
The Government should encourage environmentally sustainable businesses, help farmers to diversify, and encourage and develop tourism. They should use the proceeds of the windfall tax, which will shortly be on stream, to help young people in rural areas where there is high and persistent unemployment. Community projects would create employment opportunities for such young people.
The Government should concentrate on the protection and enhancement of the countryside environment and set national strategies for the protection of rural areas. That will entail considering hedgerows and the retention and planting of woodlands so that we can rebuild the rural community that was decimated by many of the Conservative Government's policies. There should be a Minister in each Department responsible for countryside matters, and the Government should help to provide low-cost housing by assisting housing associations and using some capital receipts to allow local authorities to build small developments of rented accommodation. That would allow many of my constituents to stay in the communities in which they were born and have grown up.
The current review of transport policy should enable bus services to be examined again so that they are improved in many of my rural communities. Many Conservative policies caused great damage, and there is


much that the new Government need to do. Their policies will help all the people of the United Kingdom and specifically many of my rural constituents.
The Government should consider using lottery funds to help rural areas. There is much that a people's lottery can do to refurbish village halls and to provide amenities in villages and playing fields. Rather than concentrating lottery money on the major towns and projects, spending should be diversified and put into local communities. That would encourage small organisations as well as the large, well-prepared, well-briefed organisations to have access to lottery money.
There is an opportunity for people in rural areas to work with the new Government. Many of us live and work in rural areas and speak for their inhabitants. The Government have an opportunity to do much good work that will undo some of the damage caused by the Conservative Government. We shall govern for all the people of this United Kingdom. All our people have a stake in it, and we speak for rural areas as strongly as do the fox hunters, the shooters and Conservative Members.

Mr. Alan Clark: The debate takes place in the immediate aftermath of the great countryside rally in Hyde park, which I attended. The countryside is under threat from a range of influences, which my hon. Friend the Member for West Suffolk (Mr. Spring) has described. Stupid bureaucrats, greedy speculators, rogue gangs and cultural and material vandalism have all placed the countryside that we all love and cherish under threat.
The rally seemed to polarise two important issues on the issue of fox hunting. One of those issues is the tension between town and country, which has been exacerbated, particularly by spiteful and malicious press coverage in, for example, The Mirror. It referred to people who live in the countryside as bumpkins, and the reports seemed to be written by a gang of reporters who have no feeling for the countryside or the cause of animal welfare, which they pretend to espouse. Presumably they went out and ate enormous plates of steak and chips after filing their reports.
The second issue that has been affected by the polarisation is animal welfare, which the single-minded obsession with fox hunting is threatening. My credentials in this field are well known and I hope that the House will allow me briefly to weary it with them. My maiden speech supported a Bill to abolish hare coursing, which was presented by the Secretary of State for the Environment, Transport and the Regions when he was in opposition, and I voted for his later Bill to protect wildlife.
When I was Minister for Trade, I drafted legislation on fur labelling which is currently being enacted by the European Union. I have participated in many such activities, including joining the picket line at Dover docks. That was probably not the best way to ingratiate oneself with the Conservative associations which I was assiduously courting at that time.
I do not hunt and I do not permit hunts to cross land that I own. Some types of hunting are cruel and sadistic. They include the practice of stopping up, which, for Labour Members who do not know about it, involves

blocking a fox's earth so that, at the end of the pursuit, the fox cannot go underground, digging him out when he does go underground, and cubbing. There should be a close season on that pastime. Stag hunting is another such pastime. The right way to get rid of a stag is with a Mannlicher .273 with a telescopic sight, not tearing it to pieces in water.
Those who favour a Bill on fox hunting must be prepared to make some concessions. There is a majority feeling on the topic that cannot be ignored. If Labour Members and the Government are prepared to make illegal—and they should be illegal—the practices that I have identified, they could allow the pursuit of a fox across the countryside. That practice is deeply rooted in the pageantry of our rural history, is seated in 300 to 400 years of practice and has not only a pictorial but a sporting element attaching to it. If they can sanitise it by taking out practices that are genuinely offensive, barbarous and cruel, they would be well advised to allow it to continue.
The whole question of animal welfare has become so polarised that matters that do require attention—laboratory experiments, brutalities in stockyards, factory farming and the horrendous industrialised exploitation of animals, which takes place daily—all need to be addressed urgently by the House. There is a danger that, if Labour Members get rid of fox hunting, they will feel that they can turn their attention to other things—that they have done their duty in the animal welfare sector and can move on. This is an important subject which requires careful attention and proper analysis. There is room for a compromise along the lines that I have suggested.

Mrs. Diana Organ: I thank the right hon. Member for Kensington and Chelsea (Mr. Clark) for his contribution, and agree that that issue is dear to many people in rural areas and needs full debate and full investigation. However, it is fascinating that, in a debate on rural policies, the hon. Member for West Suffolk (Mr. Spring) and the right hon. Member for Kensington and Chelsea talked almost exclusively about a minority blood sport. There has not been much comment on what is at the heart of rural issues.
One of the reasons why Labour won so many rural seats in the general election in May is that we addressed the real issues in rural areas. Conservative Members have talked about people coming to the rally from Scotland, Wales and Cornwall. Where is the Conservative representation in those areas? The idea that Conservative Members represent the countryside is nonsense. It is the Labour Government who represent people in rural areas, because we address the issues that concern them.

Mr. Spring: The hon. Lady entirely misses the point. The Labour party is in government. It is now responsible for rural areas. We should like some answers on policy issues, which, so far, it is pushing out of the way. That is the whole point of this exercise.

Mrs. Organ: The point of the exercise is to show that the past 18 years of Conservative Government have decimated rural services and rural transport, have hindered access to affordable housing and have put rural areas at a disadvantage compared to urban areas.
The biggest problem in rural areas is access to jobs, to advice and to housing. Because of the 1985 bus deregulation, the Conservatives cut off at the knees any opportunity for rural areas to be able to develop a good communication and transport infrastructure. The pursuit of the market principle which the Conservatives followed relentlessly for 18 years, with the threats on the Post Office, rail privatisation, bus deregulation, the development of out-of-town shopping and inappropriate housing development, is the reason why rural areas felt increasingly marginalised, looked to Labour and said, "Yes, you have the policies that address our concerns." Added to the chaos in the agriculture sector and the total mishandling of the bovine spongiform encephalopathy crisis, people lost all confidence in the Conservatives.
Problems in rural areas are often difficult to identify because people suffering social deprivation often live in small pockets, cheek by jowl with wealthy people. In my constituency, there are small pockets of deprivation in places such as Broadwell, Bream, Lydney and Cinderford, but they are cheek by jowl with affluent commuter areas such as Newent and Newnham. The problems are therefore difficult to identify.
The second problem is that, in many ways, rural areas deprivation problems are worse than those of urban deprivation because of the problem of access. That is biggest issue in rural areas. People need to get a job and to training. In the Forest of Dean constituency, there are three principal towns: Lydney, Cinderford and Coleford. People can take a bus only from Coleford to Cinderford. They cannot get one from Lydney to Cinderford, yet it is the centre of further education, skills and training. That means that people live in rural areas do not have access to the services that they require.
One thing that we must do in the transport review is to make bus services accountable to local communities so that they have a say in the frequency of service, the route and the setting of fares. The 1985 deregulation increased the poverty of rural areas almost incalculably.
The other issue is the release of capital receipts. The lack of affordable quality housing leads to distress and homelessness in rural areas. Capital receipts will allow local authorities to improve the housing stock and maintenance, and, more important, to build social housing in rural areas.

Mr. James Gray: Is the hon. Lady aware that most capital receipts have been raised in relatively pleasant rural areas and that the greatest social deprivation is likely to be found in cities? Therefore, most of our carefully preserved and raised capital receipts in rural areas will be spent elsewhere in England.

Mrs. Organ: That is not true. The hon. Gentleman should consider where the capital receipts are held. I absolutely refute that. The Labour Government have clearly said that we need to consider housing need and the best value that can be delivered, so we will move funds appropriately.
Local authorities in rural areas where there is housing need to hold capital receipts.

Mr. Nick St. Aubyn: Having sat on the Standing Committee that considered the Local Government Finance (Supplementary Credit Approvals)

Bill, which releases that money for housing spending, I believe that I am right in saying that, in the hon. Lady's constituency, the proposed formula will leave it worse off than it would have been if its authority had been left to spend its own capital receipts. I believe that I am right in saying that her constituency is one of those that will suffer under the system that the Government propose to introduce.

Mrs. Organ: Forest of Dean district council holds capital receipts of about £11.4 million, and we can deploy that money in all sort of projects, involving co-operatives, maintenance and grants to projects such as Anchor "Stay Put" to increase housing stock quality.
We need access not only to affordable social housing and transport, but to new technology—information technology. We do not want rural areas to become information poor. Labour's plans for putting ports and outlets through telecottages, schools, libraries, hospitals and colleges, and for access to cable and the super-highway, will enable rural areas to end their marginalisation and to be at the centre of the information revolution in Britain. That is important because such a revolution, through the training and the access that it offers, means that it will not matter whether you live in a small rural hamlet or in the centre of the metropolis. You will be equal with one another: you will shall have equal access to training and equal opportunity.
We must develop and sustain rural areas. In the past, it has been considered that large-scale private housing developments would be a way to provide sustainable economic growth to rural areas. I totally refute that. That is not the way forward. We are left in Gloucestershire with a vestige of Tory planning. There are plans to build estates of 1,000, 1,500 and 2,000 homes in areas of Gloucestershire such as Painswick, Sedbury and Tutshill. That is wholly inappropriate to those small villages. It is not the way forward and we are fighting to ensure that those plans do not go through.
Instead, we need to build on all the opportunities that the countryside offers. There is a strong arts and crafts heritage in the Forest of Dean. Indeed, in the British economy, the money deployed from culture is greater than that from manufacturing. There are many examples of rural areas being regenerated and revitalised through the growth of small-scale arts and crafts business that grow into large ones, such as Laura Ashley, Robert Walsh in Chipping Campden and Dartington in south Devon. Lottery money should be used to encourage the arts and crafts heritage in rural areas so that we can build sustainable small and medium-sized enterprises.

Mr. Michael Moore: Will the hon. Lady join me in supporting the work of the Rural Development Commission? Will she oppose any moves by her Government to abolish it?

Mrs. Organ: You are scaremongering.

Mr. Deputy Speaker: Order. Perhaps I could help the hon. Lady. On a number of occasions, she has used the term "you". She involves the Chair when she does so. I am reluctant to call her or order, but it might help her, so early in her career, to take note of such matters.

Mrs. Organ: I apologise, Mr. Deputy Speaker, for my lack of politeness to the Chair.
It is important to develop sustainable small and medium-sized businesses, using all the rich opportunities of the countryside such as leisure, tourism, culture and the arts. We need sustainable economic growth. We must deal with the real needs of the countryside.

Mr. Bercow: I have been listening closely to the hon. Lady's thoughtful speech. She criticised my hon. Friends for what she thought was an excessive preoccupation with country sports. I hope that she will forgive me for saying that she seems studiously to be avoiding any reference to that subject. Does she propose to vote for a ban on fox hunting? If so, did she inform her electorate of that before the election?

Mrs. Organ: I have avoided the subject because it is a minority activity. The real issue is policies in rural areas. The Government will deliver policies on transport, housing and economic development that will deal with all the needs of rural areas.

Mr. Andrew George: I have had the great pleasure and privilege of being born and brought up in my constituency. Therefore, I speak from some experience of life in rural areas and the impact of Government policies on that, rather than from—as is all too often the case—the perspective of people who have moved there latterly from better-off backgrounds and suburban environments, and have a rather idyllic and out-of-touch view of what living in rural areas is all about.
I was surprised that the hon. Member for West Suffolk (Mr. Spring) should imply that all the ills facing the countryside are due entirely to the policies implemented by the Labour Government over the past two months, rather than those implemented by the Conservative Government over the past 18 years.
I remember going to the Lizard area when the Cury hunt was out. The whole community came together and my mates and I chased around on our pushbikes to see what was happening, although I do not remember the hunt ever catching a fox. I do not think that whatever happens to that leisure pursuit will have a significant impact on the economies of rural areas. I agree with the hon. Member for Forest of Dean (Mrs. Organ) that there are far more pressing issues facing rural areas.
Conservative Members talk about leisure pursuits, but there should have been more support from the previous Government to improve facilities in rural areas. For example, they should have recognised—in the teeth of prejudice—the need for improved skateboarding facilities. Too often, we think about the leisure needs of the privileged, but the less well-off also have leisure needs. Providing those facilities would contribute considerably to the economies of rural area—

Mr. Alan Clark: Skateboarding!

Mr. George: The right hon. Gentleman represents the rural area of Kensington and Chelsea. He appears to be opposed to skateboarding in rural areas. It is an important issue. We want to tackle crime in rural areas,

and providing leisure facilities for young people is important to that. Indeed, it is far more important than the wholly unimportant issue of fox hunting.

Several hon. Members: rose—

Mr. George: I will not give way. There have been many interventions from Conservative Members, and the Minister is waiting to reply to the debate.
Cornwall is an example of how the previous Government affected the economy of a rural area. Over the past 18 years, it has been at the bottom of the earnings league. It has one of the highest levels of unemployment among rural areas. As the hon. Member for Forest of Dean accurately and rightly pointed out, the environment has been under great threat from the let-rip attitude of previous Tory environment Ministers, who have allowed rural areas to be over-developed with speculative housing and out-of-town supermarkets, despite the strong objections of local authorities.

Mr. Geoffrey Clifton-Brown: The Conservative Government's White Paper predicated that 4.4 million more houses would be needed by the year 2016. Where does the hon. Gentleman think those houses will be built? Does he want to deny people who want to move out of the cities the opportunity to live in rural areas? That would be the consequence of no further development in rural areas.

Mr. George: The fundamental flaw in the Conservative Government's policy was that they based their estimates of future population growth on past levels. That is spurious and I object strongly to that approach to planning needs.
Cornwall is a good example of population growth. It has grown faster than anywhere other than the county of Buckinghamshire, which has the new town of Milton Keynes. That growth has not been integrated with economic policies; instead, there has been a massive increase in unemployment. Growth and economic policies have not gone hand in hand. If the hon. Member for Cotswold (Mr. Clifton-Brown) is concerned about accommodating people in rural areas, what about the local people who have made homeless by Tory policies?

Mr. David Heath: I share my hon. Friend's analysis of the behaviour of a Tory Government run by a suburban party.
It is very difficult for me to listen to the comments of some Members because, tomorrow, we will discuss capping provisions that will have disastrous effects on rural services in my own county of Somerset. I hope that some of the hon. Members who have spoken so eloquently on rural services in today's debate will support the counties of Somerset and Oxfordshire in tomorrow's debate on the issue.
On the matter of planning and housebuilding—

Mr. Deputy Speaker: Order. The hon. Gentleman's intervention is far too long.

Mr. George: I am sure that the matter mentioned by my hon. Friend the Member for Somerton and Frome (Mr. Heath) will be debated fully tomorrow. Because of


my deep experience of the pains and pleasures of living in rural areas, I have a great deal to say—as I am sure that hon. Members will appreciate—on the matters that we are debating. However, I am aware also that I must leave time for the Minister's reply.
The past 18 years of Tory Government policy have led to an increase in homelessness in rural areas. The housing market is often called an open housing market, but it is a private housing market. In Cornwall, we have one of the nation's biggest mismatches between earnings levels and house prices. Opportunities for local people to get on to the first rung of the housing ladder are very few and far between, and those trying to obtain a council house in a remote rural area cannot get one.
In the private rented sector, the tourist industry has taken precedence. Rural areas therefore face enormous pressures, making it incredibly difficult for local people to find accommodation.
Building speculative, executive homes in rural areas does not answer the housing needs of local people. Those needs were also not met by the Tory Government's legislation, which allowed council tax reductions of 50 per cent. for second-home owners in rural areas. Such measures simply further encouraged the iniquitous trend towards second-home ownership, which—hand in hand with homelessness and a shortage of affordable housing—has greatly increased in many of the villages in my constituency.
Although many rural issues must be addressed, I specifically ask the Minister to tell us whether an integrated rural policy will be developed involving all Departments, including the Department of the Environment, Transport and the Regions, the Department of Trade and Industry, the Department of Health—because many cottage hospitals are under threat—and the Ministry of Agriculture, Fisheries and Food.
We must also recognise the important role of the Rural Development Commission and the Countryside Commission. It was rather rich for my hon. Friend the Member for Tweeddale, Ettrick and Lauderdale (Mr. Moore) to question the Government's commitment to the Rural Development Commission. They have withdrawn funds from the commission and spent some of its core budget on the frivolous activities of rural challenge. I hope that the Minister will address the issue of integrated policies.

Mr. Tim Yeo: I congratulate my hon. Friend the Member for West Suffolk (Mr. Spring) on securing this debate. Judging by the level of interest shown by hon. Members, especially Opposition Members, we could use a full day's debate on the subject every week for some time to come. I pay tribute to him on his speech, in which he made many important points. He is a resolute champion of rural interests in Suffolk.
My right hon. Friend the Member for Kensington and Chelsea (Mr. Clark) expressed views for which he is well known. I have no doubt that other hon. Friends, if they could have spoken in the debate, would have dealt in some detail with the points that he raised. I hope that they will have an opportunity to do so in a future debate.
I regret to say that I felt that the speeches by Labour Members demonstrated the nature of the problem. There may be many Labour Members in this Parliament,

but there are very few with an understanding of the countryside. Judging by the attendance for today's debate, very few Labour Members have even an interest in the countryside.
Among the very important points raised by my hon. Friend the Member for West Suffolk were the irrelevance of an additional tier of government for rural areas; the bias of many county councils—certainly it is true of Suffolk county council—against rural areas and in favour of urban areas, where Labour party support has traditionally been concentrated; neglect of—

Mr. Andrew Love: Will the hon. Gentleman give way?

Mr. Yeo: No. I am sorry, but I do not have time to give way.
Other points raised by my hon. Friend the Member for West Suffolk were the neglect of important rural assets, such as footpaths, and the impact of the minimum wage on the rural economy. I note that the hon. Member for Delyn (Mr. Hanson) did not say at what level the minimum wage which he so enthusiastically supported should be set.
On field sports, I reiterate my robust opposition to any legislation that aims to outlaw traditional country sports. In that context, will the Minister be able to tell us whether the fact that so many Labour Members support such legislation is connected to the £1 million donation to the Labour party from the International Fund for Animal Welfare? In the previous Parliament, in early-day motion 726, that organisation was described by Sir David Steel as
a private company … which is simply an animal rights lobbying organisation fleecing money from the public and enriching its operators".
Will the hon. Lady tell us whether the Labour party solicited that donation? In view of the Labour party's proclaimed commitment to opening up details about party funding, will she tell us—I am sure that she will not wish to dodge the question—whether the International Fund for Animal Welfare approached Labour, if Labour did not approach the fund?
Given the size of the donation, one must assume that the Labour party made detailed inquiries about the nature of the fund's activities. Will the Minister therefore tell us on what basis the Labour party judged that fund to be a suitable organisation from which to accept money? What discussions were held between Labour and the fund on the issue of field sports? If she cannot answer those questions in her reply, will she write to me and place a copy of her reply in the Library?
My hon. Friend the Member for West Suffolk mentioned the White Paper on rural England, which was published—to widespread acclaim—in 1995. A progress report, "Rural England 1996", assessed the achievements of the 12 months following publication of the White Paper. At the conclusion of "Rural England 1996", there was a commitment to making subsequent progress reports in 1997 and thereafter. Will the Minister confirm that the Government intend to honour that commitment? Will she confirm also that future progress reports will contain the same helpful check list, listing every individual commitment, which was originally made in the 1995 White Paper and occupied the last four pages of "Rural England 1996"?
My hon. Friend the Member for West Suffolk also mentioned access—a crucial issue for many people living in the countryside. Will the Minister now tell the House what is meant by the Labour party's manifesto commitment, which refers to
greater freedom for people to explore our open countryside
but adds:
 We will not, however, permit any abuse of a right to greater access"?
Does that commitment mean that there will be legislation to introduce a statutory right to roam? If it does not mean that, what does it mean?
Does the Minister understand that the uncertainty—indeed, the threat—about the Government's intentions does nothing to encourage further progress on voluntary agreements with landowners, which have secured such an enormous increase in the amount of open countryside to which the public now enjoy access?
My final comments deal with the all-important matter of resources. In the 2 July Budget, the Chancellor of the Exchequer announced his smash-and-grab raid on pension funds by abolishing the advance corporation tax credit. Even now, two weeks later, the full impact of that smash-and-grab raid has not yet been fully understood. The consequences of the Chancellor's raid are devastating for rural areas and for the local authorities that are responsible for those areas. Norfolk county council, for example, now faces an annual shortfall of £5 million a year in its pension fund, which is more than 1 per cent. of its total budget. In Lincolnshire, the equivalent figure is £2.45 million; and, in Somerset, it is £2.1 million a year.
The shortfalls have already started to accumulate—the change was made effective two weeks ago—and they need to be made good very urgently. If local authorities are to act responsibly in the interests of their employees and future pensioners, they cannot allow their pension funds to fall into substantial deficit. Therefore, local authorities' contributions to those pensions funds must rise.
There are three options to meet the cost of those higher contributions. The first is that services can be cut; the second is that council tax can sharply rise; and the third is that the Government will raise the revenue support grant. There are no other options. Will the hon. Lady tell the House today which of the choices the Government propose to adopt? If she cannot tell us, will she at least say when she thinks the Government will announce which option they have chosen?
To put a little flesh on the argument, in Norfolk more than 200 teachers may now face the sack, making a total mockery of the Government's election promises about class sizes. As the hon. Member for Putney (Mr. Colman) warned the Chancellor before the Budget, no increase of the sort required by the abolition of ACT could be afforded by local authorities without their having to make further cuts in services to their local residents. Millions of anxious people in the countryside will be hanging on the Minister's words this morning. They are wondering whether the Chancellor's smash-and-grab raid will cut services in their areas. Their uncertainty and anxiety should be ended at the earliest possible date.
I greatly regret that there is no time to pursue the other important issues raised in the debate. The Minister may not be able to respond to all the points raised by me and

my colleagues, but I hope that she will deal with as many as she can. In passing, I remind her that I am still waiting for a letter from her on related issues that I raised in a debate on 10 June.
The importance of rural issues has been reflected in today's attendance and in the quality of the speeches, especially those of my colleagues. In the afterglow of their election victory, the Government may think that a majority derived from urban constituencies gives them the right to ride arrogantly and contemptuously over country dwellers and their concerns, but last week more than 100,000 people issued a powerful warning to the Government in Hyde park. This week, my hon. Friends have repeated that warning to the House. The Government ignore that warning at their peril. The Minister now has a chance to show that the Government will at least start governing in the interests of all the people in this country, including those who enjoy and live and work in the countryside.

The Parliamentary Under-Secretary of State for the Environment, Transport and the Regions (Angela Eagle): I congratulate the hon. Member for West Suffolk (Mr. Spring) on his success in securing this debate, but he and some of his colleagues have missed the opportunity to deal with some of the real issues facing people who live in rural areas.
It is interesting to find that, in the general election, the hon. Member for West Suffolk suffered a 13 per cent. swing to Labour in his rural area. His majority is now only 1,800. When people had the chance to express their views about the previous Government's 18 years in office, there was a huge swing against the hon. Gentleman and the Conservatives—that is the real view of the people of rural Britain, not that expressed by the people in Hyde park last week.

Mr. Clifton-Brown: Will the hon. Lady give way?

Angela Eagle: No, I have fewer than 10 minutes. Plenty of Conservative Members—well, all 11 who managed to stay for the entire debate, which is not a startling turnout—have had the opportunity to speak.
The hon. Member for South Dorset (Mr. Bruce), who accused me of not being briefed, left the Chamber for some of the debate and then returned, misquoted the levels of the minimum wage recently agreed by the agricultural wages board. For his information, they now stand at £4.20 an hour for ordinary labourers and £3.06 an hour for casual workers.

Mr. lan Bruce: rose—

Angela Eagle: No, I am not giving way.

Mr. Bruce: On a point of order, Mr. Deputy Speaker.

Mr. Deputy Speaker: Is it really a point of order?

Mr. Bruce: It is indeed, Mr. Deputy Speaker. I want to ask your advice on how I should proceed. I left the


Chamber to check the figures, and I find that I did mislead the House. The minimum wage for an 18-year-old is £2.60 an hour, not £2.95, and for a 16-year-old it is £1.84.

Mr. Deputy Speaker: That is not a point of order.

Angela Eagle: Out of interest, the hon. Gentleman's majority is now 77. There was a 15 per cent. swing against him, which again shows the views of rural voters on the previous Government's 18 years in office.
Conservative Members have presented a caricature of the urban-rural debate. I understand that people have very powerful feelings about fox hunting and some issues which may be coming before the House in private Members' Bills, but this debate should rightly have been about the issues raised by, for example, my hon. Friend the Member for Delyn (Mr. Hanson) in his excellent contribution, my hon. Friend the Member for Forest of Dean (Mrs. Organ) and, indeed, the hon. Member for St. Ives (Mr. George).
They spoke about the problems that rural people face every day—the problems of transport, access to schools, hospitals and housing, especially for young people who face having to leave the places in which they were born because they cannot afford to live there. They are the issues that affect the everyday lives of people in our rural communities. It is a great pity that Conservative Members could not spend very much time even thinking about them because they were so obsessed with issues such as hunting, which the House will be debating.
Conservative Members made great play of last week's Hyde park rally. We were all privileged to hear the speech of the right hon. Member for Henley (Mr. Heseltine), who told the rally that what he sees as the threat to hunting is a
vicious onslaught on a treasured tradition of rural life.
Where were Conservative Members—in fact, where were the members of the public who were in Hyde park last week?—when the right hon. Gentleman decimated the coal industry and destroyed 55,000 jobs in rural areas? The Conservative Members were in the Lobbies voting for it, so we shall take no lectures on hypocrisy from them.
In the time left to me, I should like to ask Conservative Members to take this opportunity to condemn—[Interruption.]

Mr. Deputy Speaker: Order. There is a great deal of noise from Opposition Members, which is unfair when a Minister is replying to the debate.

Angela Eagle: Will Conservative Members take this opportunity to condemn the threats received by my hon. Friend the Member for Worcester (Mr. Foster)? A snare was recently sent to him in the post. He received a letter saying that the writer
would like to throw your entrails to the dogs.
Another said:
You will not live to see the end of your Bill".
A third said:
You and your family ought to find bolt holes"—
[Laughter.] Death threats may be funny to Conservative Members, but they do not reflect well on the people who send them. I would expect the party of law and order—it still prides itself on that title despite its record in office—to condemn such assaults on free speech.
Will Conservative Members also condemn some speakers at the Hyde park rally who threatened to burn forests and poison water supplies and who stated that that rally would be the last peaceful one? These are not the activities of people to whom we should listen seriously. Conservatives Members need to realise that the majority of people in the countryside are anti-hunting. We must also remember that hunting is not a town-country issue—it is a moral issue, which is why there will be a free vote for Labour Members, should the Bill be debated.
In the very limited time I have left, I shall point out that the Government believe in opportunity, fairness and prosperity for all. That applies equally to urban and rural areas.

Mr. Owen Paterson: Will the hon. Lady give way?

Angela Eagle: No. I have only two minutes left—be real.
In our manifesto, we gave a number of pledges on rural matters. We pledged to recognise the special needs of rural areas and communities, not to allow public and transport services in rural areas to deteriorate, to give greater protection to wildlife, and to give greater freedom to people to explore the open countryside. It has already been said from the Dispatch Box that the principle of access is not negotiable, but we are aiming for an extremely wide-ranging consultation with all the parties involved on the question of access to the countryside. The consultation paper will be issued before the end of the year. We want to hear everybody's views so that we can come up with workable legislation that will be supported as widely as possible.
The Conservatives brought us BSE, transport deregulation and the poll tax, which decimated the incomes of many rural people. They have no representation in Scotland and Wales. Their concern about fox hunting and many issues that people in rural Britain feel are irrelevant sits pretty ill. If they want to get back on to the Government Benches within a reasonable time, they must modernise. They need to realise that they have to represent the real interests, views and life styles of all people in Britain if they are to have a chance of regaining the trust of the electorate.

Mr. lan Bruce: On a point of order, Mr. Deputy Speaker. I appreciate that the Minister had a limited amount of time, but two pieces of information were given to the House during the exchanges. The first is about the minimum wage. The Library has just given me the figure, which is £1.84 for 16-year-olds. The hon. Lady—

Mr. Deputy Speaker: Order. The hon. Gentleman has already commented about that. It is not a matter for the Chair. Any facts and figures given by hon. Members are given in good faith. It is not a matter for the Chair, and the hon. Gentleman cannot put the record straight on a point of order.

Coal Areas (Housing)

11 am

Mr. Joe Ashton: I thank Madam Speaker for making time available for a debate on this important national problem.
After the miners' strike of 1984–85, the previous Government instructed British Coal to sell its stock of houses. At that time, it owned 165,000 or 170,000 houses of different types that had been built at various times in colliery areas. In 1984, parts of some of the older villages were put up for auction to any speculator who would buy them.
The houses were first offered to the miners. Many of them purchased their homes, even though the pit was closing. However, many elderly miners did not want to buy their houses, because they were 50 or 60 and not in the best of health, so they carried on renting. The houses were sold en bloc in many areas throughout the country—south Wales, Yorkshire, Nottinghamshire, Derbyshire, Durham and Scotland. The speculators moved in and snapped up the houses, often for as little as £3,000 or even £1,500 each.
I am particularly concerned about the village of Warsop Vale, on the boundary of Nottinghamshire and Derbyshire, abutting on to the constituency of my hon. Friend the Member for Bolsover (Mr. Skinner). A landlord called Dennis Rye bought many houses in Derbyshire and Nottinghamshire. The area has had nothing but problems since.
The houses in Warsop Vale were built around the turn of the century—probably at about the time of D. H. Lawrence. A D. H. Lawrence film could be made there, with the back ginnels and the back yards. They were decent terraced houses. With improvement grants from the council, bathrooms had been added to the backs of the houses. It was a happy village. There are people of 75 who were born in the village, worked all their life at the pit, married someone from the village and still live there. It was a good community with thriving pubs and shops.
The past 12 or 13 years have been disastrous. The private tenants moved in by the landlords as the pensioners died were often transient residents. Many had been evicted or had left their wives and run off with someone else. The private landlords advertised in the papers for them. The tenants had no feeling for the community, often staying for just a few weeks. Their weekly rent for a small terraced house was sometimes up to £55 or £60, paid by housing benefit. We protested strongly about that, but the Government of the time were in favour of a free market for rented houses and were happy to pay £50 or £60 housing benefit for each house. The area became like a transit camp, and the problem grew and grew.
When the previous Government restricted the rents to more or less what the council would have charged—about £20 or £25 per property—the private landlords decided that the houses were not worth letting. It was easier to let them stand empty and try to make the council take the blame or get a lump sum from the council for the empty houses.
The houses were soon vandalised. Kids threw bricks through the windows and organised gangs moved in to strip them of anything with a second-hand value—radiators,

taps or doors. Anything that could be unscrewed was taken. Kids in the neighbourhood, who had no jobs and no future at the pit, as their fathers had had, set fire to parts of the houses. Some houses became infested with vermin. Warsop Vale and many other villages now look like a war zone. Places have been shelled and set on fire and look like houses after the blitz. I lived through the blitz as a little boy and remember seeing some houses inhabited and others left derelict for a long time.
The miners who bought their houses cannot sell them. They have modernised the houses and made them into what we in our neck of the woods call little palaces. Many have double glazing, new doors and central heating. They are unsaleable because of the empty houses next door that have been set on fire, have rats or are vandalised. The whole place is in a terrible state. European grants have been given to some villages to renew the pavements and the lighting, but there has been nothing for the housing.
It is impossible to attract new industry. Anybody thinking of setting up a new factory looks at the housing and the wreckage and moves elsewhere. There are so many empty sites available in pit areas that people can take their pick. There may be subsidence problems in the area because of the old pits. People whose families have lived next to a colliery for 100 years, with heavy lorries going back and forth, klaxons sounding at night, night shifts and dust from the spoil heaps now have to put up with the houses turning into slums.
In addition, the Fitzherbert estate now wants to move in and quarry for thousands of tonnes of limestone, as do Tarmac, Redland and any other company that knows that it can enhance the value of the old pit site by £1 million simply by getting planning permission for limestone extraction.
We are talking about people who have suffered all their lives. They have no hopes unless the new Government take action. I have been going to the village for many years saying that we need a new Government and new policies.

Mr. Bill O'Brien: Does my hon. Friend agree that, because of the rundown of the villages, amenities such as thriving shops, pubs and telephone kiosks to which he referred have been lost? The old people who made the village no longer have those back-up amenities. That is a further problem for them, adding to my hon. Friend's argument that something should be done for such communities.

Mr. Ashton: My hon. Friend is right. The pub in Warsop Vale has shut. The post office shut and reopened as part of a grocer's shop. Bus services are poor. Elderly people are trapped in their houses, unable to get to a supermarket. It is like a backwater of Kentucky.
Five years later, British Coal again tried to auction off the houses, and there was uproar. My hon. Friends the Members for Mansfield (Mr. Meale), for Normanton (Mr. O'Brien), for Rother Valley (Mr. Barron), for Bolsover, others who want to speak in today's debate and even some Tories, protested strongly at the inhumane attitude of auctioning off people's lives. The Government agreed and told British Coal to sell houses to housing associations.
Later types of houses, made from concrete slabs, which were built in 1947 because miners were coming down from Durham and Scotland, are now in the hands of


housing associations, but they have problems. Many of them need repairs. The iron bar that runs through the concrete slab is often rusted or rotten. Some miners bought such houses, but now find that they are stuck with them because building societies say that they do not have a long life and they will not provide mortgages on them. The housing stock is not very good at all, although I must say that the housing associations that took over the houses have been excellent landlords, and the scheme has worked in that respect.
The landlords who bought the houses for about £1,500 each have made enormous profits. They have managed to take in rents of £50 or £60 a week for 10 or 12 years, while spending negligible amounts on the houses. Now that they realise that they cannot get such rents, they want to sell the houses to the local council for about £17,000 each.
So, along with one or two other private landlords, Mr. Dennis Rye in Warsop Vale, who bought 80 houses, 20 of which have been vandalised and are standing empty, wants to take about £1 million out of the small village of 280 houses. The modernised houses with two or three bedrooms, an attic and a bathroom, which have had grants spent on them and on which many people have spent a lot of money, still sell for only £21,000 each. In London, the same houses would go for £80,000 or £100,000.
The local owner-occupiers and decent tenants have been very angry for many years. Reports have been produced and there have been meetings, but we have got nowhere. Numerous surveys on housing conditions have been conducted by various officers of district and county councils, but everybody blames each other. We need Government action to get something done.
I understand that the Housing Corporation in the east midlands has a surplus of £3 million, so there is cash available if it is a question of housing associations buying the houses. Three or four weeks ago, my hon. Friend the Member for Mansfield and I clashed with the housing associations at a meeting. It seems that they admit that they have the cash but are interested in spending it only on the houses they already own, and are not keen on using it to purchase houses from private landlords and improve such houses. They accept that the Housing Corporation in the east midlands is sitting on the money, but put up strong resistance and display a marked reluctance to taking over houses from private landlords.
The Government have announced that there will be extra cash from the receipts of the sale of council houses, which is very welcome. The announcement was received with acclaim. Obviously, the scheme will be phased in. Local councils have reacted by saying that the money must go on modernising council houses and that they would prefer to spend the cash on their own council houses rather than private rented houses, which nobody wants to touch with a barge pole due to the amount that needs to be spent on them.
There is a problem with the old compulsory purchase powers. When Roy Hattersley was chairman of housing and I was deputy housing chairman on Sheffield city council in the 1960s, the council compulsorily purchased thousands of houses at a time. All that the landlord got was the value of the site. The regulation was simply applied to houses that were unfit for human habitation. I know as well as anybody that they were unfit because I lived in one.
Such houses had lavatories that did not work, they were infested with rats and they were next to belching chimneys and drop hammers. We grew up in such conditions. It was accepted that such houses were unfit for human habitation, compulsory purchase orders were made and the scheme worked—the council built council houses and people were rehoused.
The Housing Act 1985 took away such powers from local councils. Compulsory purchase orders were allowed in certain circumstances, but councils had to pay the market price—whatever it was—and the price had to be agreed with the landlord. Owners are not against selling the houses—they would not mind at all selling them—but they want £17,000 for a house for which they paid £3,000 12 years ago and for which they have charged a rent of £3,000 a year—perhaps they have taken £30,000 in rent in total. That does not add up, and it cannot go on.
In its election manifesto, the Labour party gave an undertaking that council receipts from the sale of council houses which are received but not spent by councils will be invested in building new houses and rehabilitating old ones, and that the scheme will be phased in to match the capacity of the building industry. It quite rightly said that the cash from capital receipts can not only be spent on council houses but can be used for the provision of new social housing in partnership with registered social landlords, for private-sector renovation, for improving energy efficiency and for raising the quality of a neighbourhood by, for example, encouraging or promoting mixed development.
The problem is that there are loopholes in the system. Even if councils had the cash to spend, private landlords would blatantly exploit the loopholes in the legislation. In 1996, the Government introduced the Housing (Fitness Enforcement Procedures) Order. Sections 86/189 and 86/190 should help councils to grab hold of negligent landlords, but there are too many loopholes.
The legal loopholes include landlords being allowed 28 days to start repairs; so they start, and then they stop. The council takes the landlord to court, so he starts again, and then he stops again. Then he does just enough repairs to take the matter outside the law, which covers "substantial disrepair", and says that he has taken the safety measures and does not need to do anything else. The procedures include vague clauses such as the council has to be "minded to take action"—whatever that might mean—and "give fair warning" that it is thinking about taking such action. If the landlord does not do something, the council thinks about it a bit more.
The maximum fine is £2,500. Private landlords laugh at that. It is an offence if somebody intentionally fails to comply with the council order, but it is very difficult to prove such intention in court. Did the person deliberately not comply, not understand the order or employ contractors who went off moonlighting, or could the contractor not find his tools? Usually, the contractors are part of the landlord's business, anyway. The system is full of loopholes, and is not working.
We have a new Government commitment to license landlords of houses in multiple occupancy, which is very good. Such landlords should have to apply for a licence to run houses. There are already thousands of problems with students who are being ripped off and who have to take out massive student loans to pay £40 a week for one


room to somebody they do not know or cannot find and who is not implementing any safety measures such as providing fire escapes.
I hope that my hon. Friend the Minister will consider licensing not only houses in multiple occupancy but any dwelling or property where a landlord deliberately keeps it empty or uninhabitable in order to try to put pressure on the council, do a deal, or simply because the property is going up in value. Any house that is boarded up—even if the landlord cannot be bothered to board it up and squatters are allowed in—should be licensed. The existence of such houses is unfair on tenants who live next door, have mortgages and have spent money on their house, but cannot sell it because it looks straight across at a slum with smashed windows where kids run in and out.
It is estimated that 20 per cent. of private rented property is unfit or uninhabitable.
We should introduce new offences. It should be a separate offence for a landlord deliberately to refuse to maintain a house in fit condition for habitation. We should say that no landlord is entitled to receive housing benefit if he refuses to carry out repairs. We should also prohibit landlords from increasing rents if they refuse to do repairs and we should refuse certificates and licences to such landlords.
We should also pass legislation so that tenants of landlords who refuse to do repairs have the right of compulsory purchase of their rooms, perhaps as a co-operative. If the council has not got the money, the tenants could get together and buy their houses at a price agreed with the independent valuer. If that does not work, perhaps because the tenants are elderly, they should have the right to vote for a housing association to take over from the landlord at an agreed price. Such measures would go a long way towards deterring such behaviour by landlords. We should have a licensing system, and we should strengthen laws that compel decent behaviour from landlords.
Only 10 per cent. of chief environmental officers currently think that the previous Government's Housing Grants, Construction and Regeneration Act 1996 has worked. Only 1 per cent. of them believe that it has improved standards. The Act is deregulation gone mad. The previous Government took away all the regulations and let the landlords do what they wanted.
I do not wish to detain the House much longer, but I wish to put on record the recommendations of the legal experts of Mansfield district council, who have a good approach to the problem. I am sure that the Coalfield Communities Association, which has about 80 members among towns, villages and district councils who share the same problems, agree with the legal experts' opinions.
The experts suggest that the Government should abolish the order made under section 86 of the Housing Grants, Construction and Regeneration Act 1996, which is known as the Housing (Fitness Enforcement Procedures) Order 1996; abolish the requirement restricting local housing authorities from specifying the commencement of work earlier than 28 days from the date of service of section 189 and 190 notices; abolish the provision whereby section 189 and 190 notices are suspended on appeal; introduce a fast-track appeals procedure for Housing Act action; change the level of fines that can be awarded on

successful prosecutions for failure to comply with sections 189 and 190 to a minimum of £1,000 and an unlimited maximum; change the mens rea of section 198A offences from "intentional" to "without reasonable excuse"; introduce a new provision whereby people commit a summary offence if they fail to maintain their dwelling in a condition fit for human habitation without reasonable excuse; introduce a new power to allow local housing authorities to make control orders on properties that are not houses in multiple occupation; introduce a licensing scheme for all private lettings; introduce a provision under which landlords are not entitled to increase rents unless a certificate from the local housing authority states that the property is fit; introduce legislation to enable aggrieved private tenants to purchase compulsorily their houses collectively or to vote to transfer to a registered social landlord who would buy at the district valuer's valuation; simplify and accelerate compulsory purchase powers; and, finally, introduce legislation whereby housing benefit is payable only to approved landlords.
I am sorry that I have not had the chance to notify the Minister of those points, but the council's legal experts delivered their opinion to me only yesterday. I thank him for giving his time to listen to the debate and I know that many of my hon. Friends wish to speak. I am certain that the Government, if they go about it the right way, can solve the problem.

Mr. Dennis Skinner: I thank my hon. Friend the Member for Bassetlaw (Mr. Ashton) for initiating the debate today. The problems he has described are mirrored in all the coalfield areas, as exemplified by the fact that several of my colleagues are here today to speak on the issue. My hon. Friend gave a list of suggestions by Mansfield district council. Its environment department is certainly at the sharp end of dealing with the landlords who cause problems.
One particular landlord in my area has already been mentioned—Dennis Rye. He has got houses all over the place, including Yorkshire, and I reckon that he has houses in 12 or 15 constituencies. He has spread his net far and wide. In the Pleasley area of Bolsover, which is not very far from Mansfield, Dennis Rye owns some 70 houses. In 1987, he decided to apply for grants, and Bolsover district council agreed to give him grants to improve the houses. Dennis Rye then decided that he wanted grants to make the properties into flats to make more money. The council said that he could have the money, but he appealed against that decision. That dragged out the procedure.
Some years later, Dennis Rye said that the properties should be demolished. So the Bolsover district council, as the Mansfield district council would have done, said that it would put in an order to demolish the houses, which were unsightly and like a bomb site, as my hon. Friend the Member for Bassetlaw described. What did Dennis Rye do? He appealed against the demolition order. The case went to court again and was dragged out further.
Such cases usually go to magistrates courts, but sometimes to the county courts. Sadly, all the magistrates courts work separately, but many deal with the same small number of landlords. Although my hon. Friends and I are aware of the landlords' efforts in all the different areas, the magistrates, for some reason, are not aware that they are being taken for a ride.
In the 1990s, after Dennis Rye had appealed against the demolition of the properties in Pleasley, the Bolsover district council decided to serve repair notices. We all know the problem with those. The landlord gets a builder to knock a nail in a skirting board and that is enough for the magistrates to say that the landlord has made a start on repairs, even though people are still living in terrible conditions.
The process is dragged out even more. Bolsover district council currently has three outstanding actions against Dennis Rye, but the environmental health department knows that the chances of solving the problems are remote, as it told me yesterday, unless the law is changed in the way suggested by my hon. Friend the Member for Bassetlaw.
We all know that the examples in Warsop Vale and in New terrace in Pleasley that I have mentioned are not isolated instances. As my hon. Friend said, many houses were sold off in job lots to landlords in London. I have evidence that, in some cases, groups of houses were sold three times in a month, with each successive purchaser making money from the ribs of miners and their families living in those properties. Eventually, the ownership of the properties ended up in tax havens.
Many landlords have agents in the coalfields. There is an agent in Creswell, a wonderful model village that was built at the turn of the century. Some 200 houses were built in a circle and, at the time, were an example of state-of-the-art building. For many years, while the pit was open, the village had a vetting procedure. The local National Union of Mineworkers and the residents ensured that anybody who took over an empty house was vetted. There was nothing wrong with that, and it gave an element of democracy, but it went when the pit shut.
The Tories—who are not here now, although they were in the Chamber for the previous debate about fox hunting—should understand that this debate is also about rural life. Each of those areas is a village. We are talking not about towns, but about tiny little communities. The Tory Government smashed them as they closed pit after pit. They may not have realised, although I am sure they did, that they took away the mantle of security that existed for the people who lived in those villages.
The net result is that there are no more vetting procedures in Creswell model village, with the result that the houses have been taken over by Villagate Properties, which is based at Westerham, Kent. When repairs are needed, I have to write to someone in Kent, after trying the agent first.
People are coming in from all over the place. My hon. Friend referred to the transient population. About a month ago, some paedophiles finished up living in Creswell model village. I will not go through the details, but they do not live there any more. Action was taken. Least said, soonest mended, but court cases will follow.
I want to stress to the House that the people of Creswell regarded that episode as an insult to them. They had worked hard—the miners at the pit—and now they see all those people coming in and upsetting their community.
I am not saying that everything can be done in next to no time. We have five years, but we do not want to wait for five years; we want to start now. We have a Minister who knows a little about housing. As we know only too well on both sides of the House, not every hon. Member

who reaches the Front Bench is well equipped to do the job immediately, but the Minister understands the subject and should be able to make a flying start.
My hon. Friend the Member for Bassetlaw presented a good number of proposals. Every village in the mining communities is affected. I could go on to speak about Langwith, Shirebrook and many others. They follow a similar pattern. People have been deserted by the previous Government. Their jobs have been taken away, and now they are having to put up with living in communities that are falling apart, with desolation and dereliction all around them, as at New Terrace, Pleasley.
My hon. Friend suggested the action that could be taken, and I agree with much of what he said, bearing in mind that local authorities are spending thousands of pounds going to court. Environmental teams in local authorities should be given the power to work together. They know the landlords who are causing all the trouble. Each local authority is litigating separately, but those who want to do so should be able to take joint action against rogue landlords such as Dennis Rye.
My hon. Friend referred to various housing Acts. Local authorities have the power to take a landlord to court to enforce the repair of properties and maintenance of sites, and the need to clear up the dereliction should be part of the argument for the local authority to exercise those powers.
I agree with my hon. Friend the Member for Bassetlaw about fast-track litigation, although that is a matter for another Government Department. I hope that my hon. Friend the Minister will consider that. My hon. Friend also dealt with the licensing of landlords.
For a local authority to enforce a compulsory purchase order, as I understand it, it must be based on housing gain. A local authority should be able to obtain a compulsory purchase order on the grounds that the property is unsightly and a mess—that would deal with Rye, both in Warsop Vale and in New Terrace, Pleasley—or if they can prove that there is constant litigation and that the landlords are using the courts to drag the process out.
I conclude on a more general point, which my hon. Friend may not support immediately. Many of the problems have occurred not just in mining communities, but on a wider scale, because one of the first acts of the Tory Government after their 1979 victory was to introduce the right to buy, which everyone talks about. However, another factor that caused mayhem for many people in our communities was short hold tenancies—the power of landlords to grant three-month or six-month tenancies and then kick people out. That shifted housing powers away from tenants—not that they ever had much power—to landlords. I hope that in the next five years our Government will review short hold tenancies and return to the system of intervention and control.

Mr. Kevin Barron: I congratulate my hon. Friend the Member for Bassetlaw (Mr. Ashton) on securing this opportunity to debate such an important subject.
Like my hon. Friend, I have in my constituency a large number of properties that were once owned and managed by the former National Coal Board, and as in Bassetlaw, the decision to sell off those properties in the Rother


Valley, and the clumsy and disjointed way in which the sell-off was handled, has had serious and damaging consequences for several of the villages in my constituency.
The Rother Valley has three estates consisting of former NCB homes—at Aston, Kiveton Park and Maltby. The houses on the estates were constructed using pre-reinforced concrete. They were built in factories and assembled on site. In the 1950s, at the age of eight, I moved into one of those houses, when I moved from North to South Yorkshire.
Because of their flawed design, the houses on those estates have been classified as defective under the terms of the Housing Defects Act 1984. I understand that those provisions are contained in more recent housing legislation. The steel in the houses is corroded because the concrete has let water in. The steel has expanded, rusted and forced the concrete up on the outside. Consequently, no one will loan money against such a house.
The properties were sold off in lots at auction. Various parts of the estates were bought up cheaply by organisations and individuals who had little or no interest in maintaining the estate as a whole. Some properties were sold by the NCB to sitting tenants in the 1970s and 1980s, and were bought back by the local authority under the 1984 Act.
I shall describe the situation at one estate, Kiveton Park, in my constituency. Florence Unity Biby Richardson and Clive Richardson of Wimbledon own 20 of the houses. Great Parndon Investments of Harlow in Essex owns 14 houses. Michael Windle from Skipton owns 40 houses. He also owns houses on the Maltby estate. Paul Wright of Worksop owns 18 properties at Kiveton Park. DetaRock Properties owns four houses, Globe Properties owns one, and Rotherham borough council, having bought back houses from sitting tenants under the 1984 Act, owns 43.
One of the houses on the estate has a great history, as my case work revealed. The landlord proved to be so bad and difficult to deal with that the London solicitors who were acting as his agents eventually gave up on him. They cancelled their agreement with him and refused to deal with inquiries about the property's state of disrepair. I was told by the firm of solicitors to contact the landlord direct—he lived in Baghdad. He, like many other people, had bought the property at an auction in the Connaught rooms. He had seen photographs of the houses, which looked like decent, three-bedroomed semi-detached houses. No one had told him of the concrete construction that had been classified as defective. He thought that he could spend a few thousand pounds and make a profit.
The fragmentation of the ownership of what are called locally the "White City" estates was only the beginning of the present problems. Although some money is available to make the necessary repairs and correct the building faults of some of the houses, that money is too slow in coming through. When it arrives, the piecemeal way in which it has to be used can itself be a contributory factor in the decay of the estates. I shall return to that thought at the end of my speech.
The Housing Defects Act 1984 allows local authorities to buy such properties from their owners, but it does not fully cater for the circumstances on the former NCB

estates. Rotherham borough council was reluctant to buy the residents out, because it had never previously owned the stock and did not consider itself responsible for the situation. The Act made the council responsible, but it showed great reluctance, and I had a public falling out with it about how quickly it should respond and buy the properties back.
While the wrangling about the status of the houses continued, many of them fell into disrepair, and even dereliction, as they became empty. Many hon. Members will know that, when a property becomes empty, that can be the beginning of a steep downward cycle in its useful life. Properties that are empty for any length of time tend to fall into serious disrepair.
With the former Coal Board houses, disrepair can be brought about even more quickly by the new absentee landlords who refuse to take their obligations seriously. Last month, I received from an environmental health officer at my local council a letter that highlights one of the problems:
As houses become empty they are vandalised and frequently set on fire … Since March, I have served a stream of Statutory Notices on two landlords to make such houses secure. Most recently, two properties on one road have been boarded or bricked up following such action. One by the Council in default.
My local council has thousands of pounds outstanding because it has had to take action to protect the interests of the people who live on the estates, especially in terms of the safety of young children. It has spent thousands of pounds because we cannot get the landlords to act responsibly.
Empty and derelict properties also become targets for theft, especially on the estates, where metal fixtures and fittings are sold for scrap. The latest craze on one of the estates is the removing of drainage covers, despite the fact that they are heavier than some of the inside fittings. Of course, the open manholes then become a health and safety hazard. They get filled with rubble, which blocks the drains and causes further environmental health problems.
In some cases, the problems of the estates are becoming so bad that even the infrastructure is failing. A letter from Yorkshire Electricity, which was forwarded to me, says that the company noted concerns about the state of the supply cables, but:
There will be a need to take an overview of the best approach to resolving this problem since there are so many interested parties on the White City Estate".
That was a reference to the estate on which I was brought up. A couple of years ago I took Jeremy Walker, who works in the Government regional office in Leeds, to see that estate, and showed him the house that I moved into at the age of eight. It was derelict and had been vandalised. People had been in and stolen all the copper, including the main means of stopping off the water. Water was jetting up into the kitchen ceiling, and somebody had thrown an old mattress down to try to stop the flow. The house next door had been burnt out completely, right up through the roof tiles.
My constituents have had to live with those conditions for years. We have had a decade of such problems on the estates, and they are not nice places to live now; they are certainly not like the place that I moved to in 1955 with the rest of my family.
In some cases, fire damage in empty houses means that the only suitable course of action is demolition. However, because of the way in which the bundles of houses were


sold, it is never certain that a single landlord will own adjacent houses that may also need to be demolished. An argument is taking place now about one house that needs to be demolished but is attached to another. The landlord refuses to do anything about the situation, so we cannot demolish a property that is causing a hazard on the estate.
On two of the estates a scheme is in place to reinstate properties, and the work is being done by a local housing association. I congratulate the housing association, which is doing some magnificent work, especially in view of the circumstances on the estates. In some parts of the estate, schemes have been agreed to new build by both demolition and reinstatement of homes under the Housing Defects Act.
The greatest problem is that money for the schemes trickles out too slowly to cope with the scale of the problem. A scheme gets going in an area, but the following year it has to stop, because we cannot get the funding from the Housing Corporation to the housing association. My local council, which owns houses on the estates, is giving them gratis to the housing association so that the process of regeneration can take place. None the less, the problem is still difficult.
Perhaps the most important factor is the botched manner in which the former Coal Board properties were sold by the Conservative Government. It means that no one organisation has control of the process of regeneration, and no proper sanctions exist to make the various parties work together.
The lack of co-ordination leads to fire-gutted houses, open to vandalism, being left standing in otherwise tidy streets. It leaves boarded up houses next to well-maintained ones, and means that properties in need of repair are de-prioritised as resources are reallocated to secure properties that, although they are beyond repair, cannot be demolished. That is not right; nor is it a sound use of public money.
While all that is taking place, tenants' associations have been working closely with housing associations and builders estates to improve their own environment. I pay tribute to the tenants on the estates, who have got together and set up tenants' organisations, which are now arguing with the authorities to get things done. Without them, I do not know what would be happening on those estates now.

Mr. Allan Rogers: We have the same sort of problems in the Rhondda valley, especially associated with such estates, and with unemployment. One of the direct results and hidden charges is the relationship between the scenes of vandalism that my hon. Friend is describing, and general criminality. Unfortunately, it seems that, on some of the estates, the aura and ambience of criminality will not be overcome in this generation. A long-term effect on the community has been created.

Mr. Barron: Yes, I am sure that that is right—but today I shall not go into the wider issues, beyond the economics of the estates to their social problems, which are there for all to see.
Will the Minister have the time to come to the Rother valley and see for himself what action is required to speed up reinstatement and regeneration of the former Coal Board houses? I believe that action must have two main elements.
First, the sloppy handling of the sale of the houses must be rectified. There must be some mechanism to require the various owners to work together better. I do not know whether that should be through some form of compulsory purchase, but it must be done. Public money is being spent in a "patchwork quilt" way because of the ownership of the houses, and that is not good public investment for the future. None of us would choose to invest the money that we, as taxpayers, are investing in the estates in that particular way, but at the moment we have no choice because of the major problems caused by multi-ownership.
Secondly, we need to tackle the skewed system of resourcing repairs and renovations. That means putting in place a better and more coherent system for releasing money to reinstate properties. More money, in bigger blocks and more regularly paid, is needed if the estates are to recover their former prestige.
There is no doubt that the work now being done is improving the estates. The problems are slowly being solved. However, that work throws up questions about how landlords, who are not eligible for current grants, can fit in with the regeneration schemes. Some of them sit and do nothing. All they want is the rent from the properties, yet we as taxpayers may be spending money through housing associations on the house next door, to reinstate it and give it a 30-year life against which money can be borrowed. That is not common sense. If the Minister visits my constituency, I hope that he will address that issue.
Once again, I congratulate my hon. Friend the Member for Bassetlaw for bringing this important matter before the House. I hope that my hon. Friend the Minister will be positive and get out of the ways of the previous Government—ways that caused many of the problems on the estates.

Mr. Paddy Tipping: I am grateful to my hon. Friend the Member for Bassetlaw (Mr. Ashton) for making this debate possible. I am pleased to follow my hon. Friends from coalfield communities who have spoken graphically of the pain and anger in those communities in Nottinghamshire and throughout the country.
There is no doubt that we have had 18 wasted years. Coalfield communities feel strongly that the previous Government buried the coal industry and tried to walk away. My hon. Friend the Minister should be aware that there are high aspirations for what the new Government can achieve for those communities.
People in coalfield communities are characterised by a continual desire for improvement: they always want better for their children than they have had for themselves. They want their children to have better jobs and education, and they are crying out for new investment, new hope and a new future under Labour. It is clear that new investment in housing can bring new hope.
I want to confine my remarks to the fairly narrow subject of housing associations. My hon. Friend the Member for Bassetlaw and others spoke of houses that have fallen into private ownership. My hon. Friend made the strong case that housing associations may have a role in acquiring those houses and renovating them. However, at present those housing associations that own ex-British Coal houses have a liability. I want them, as social landlords, to discharge that liability.
We live in a crazy world in which money from the public purse is given, through legal aid, to tenants of housing association houses to sue their landlords. It is absolutely right for us to work with housing associations and put pressure on them to do up their ex-National Coal Board houses.
In the east midlands, 1,800 houses passed to housing associations in 1984, split three ways between Leicester housing association, Nottingham community housing and East Midlands housing association. It was envisaged that they would renovate those houses, but their efforts were stymied because they were denied grant by what I consider a vindictive attitude on the part of a former Secretary of State, Nicholas Ridley. They were told that they had to fund the renovation by the sale of some of their housing stock, which has proved impossible as the housing industry has declined.
Who wants to buy a derelict house in Bilsthorpe or Calverton, say, for £15,000, £20,000 or £21,000? The associations have not been able to achieve those sales to fund the renovation of the remaining stock. We must move towards renovation and lifting the moratorium on grant for housing associations.
In the Newark and Sherwood district council area alone, 320 housing association houses in such places as Bilsthorpe, Calverton and Rainworth need repair and renovation; in the current year, only 23 are being improved. That is a good benchmark of what has happened up to now. In Newark and Sherwood alone, it will take another 16 years to put all the housing association houses back into good repair.
My hon. Friend the Minister should reconsider the moratorium. I know that he is aware of correspondence from Leicester housing association. Let me reassure him that I am not asking for extra money or for new money. I am concerned about the way in which the Housing Corporation spends its money. I know that its east midlands regional office has £2.4 million of unallocated funds for the current year. Why cannot some of that be applied to regenerating housing association properties? That would lever in more funds, and double the amount up to perhaps £5 million.
The situation in the east midlands is not unique; it is repeated throughout the country. We should examine the reserves held at regional offices. More important, let us have fairness, not favours, for coalfield communities. Housing associations want to be able to bid for housing grant. They do not understand why they should be precluded from doing that by a vindictive action of some years ago.
My hon. Friend the Minister is well versed in housing matters, and enthusiastic about energy and conservation issues. The kind of housing of which we are speaking has a national home energy rating of only 3.6; when the houses are refurbished, their energy rating rises to 9. Condensing boilers, new windows and loft and wall-cavity insulation can make them energy-efficient. We should be doing that. People should not have to live in damp and cold houses.
Coalfield communities in Nottinghamshire and throughout the country have high expectations in general, and even higher expectations of the new Labour

Government. They want new investment in housing, new hope for their families and a better future for their children. They want the blight of poor and derelict housing to be cleared up.
I ask my hon. Friend the Minister to give people some hope by saying today that he will take steps to investigate the moratorium on grant for housing associations and introduce some fairness for the first time in 18 years, so that they can aspire to a better future for their children and their communities.

Mr. Michael Clapham: I congratulate my hon. Friend the Member for Bassetlaw (Mr. Ashton) on securing this debate, which is important because it gives the House the opportunity to focus on housing in coalfield communities. My hon. Friend referred to the vast number of British Coal houses—the scale is not always appreciated—that were sold off in the 1980s: the figure is between 70,000 and 80,000.
Some dwellings are still being sold off. In the most recent batch, which went along with British Coal's land sales, about 800 houses were sold. Many of them were in terrible disrepair, which is why many tenants did not want to exercise their right to buy. My hon. Friend the Member for Bassetlaw touched on another important reason why those houses were not bought by the tenants: many of those who lived in the houses were former miners, some of whom had been disabled in the colliery and could not work; many were retired; and many were miners' widows.
British Coal put the houses on market and, as my hon. Friend the Member for Rother Valley (Mr. Barron) pointed out, many were bought up by middle eastern business men and have changed hands time and time again, so the tenants cannot always trace the current owner.
The local authorities could not buy because they did not have the money to purchase the housing stock. At the time it was passed on to the market, there was an assault on mining communities. In the 1980s, the Government had a mentality of revenge and sold off houses without giving miners and former miners an opportunity to voice their thoughts on what ought to happen to the housing stock.
Whole villages have been sold off. Two villages in my constituency had a great deal of Coal Board housing—Dodworth on the west side of the constituency and Elsecar on the east. The contrast_between the two villages is clear. At Dodworth, many people were in a position to buy their houses—they were still working in the collieries. In general, the miners bought their houses.
As my hon. Friend the Member for Sherwood (Mr. Tipping) pointed out, miners were able to express their aspirations—I would say their "individuality", which is rather different from Opposition Members, who would say "individualism". Miners were able to express their individuality in their houses. Anyone who travels through Dodworth on the main Manchester road will see that the housing stock is in good repair and is a great credit to the village.
At Elsecar on the eastern side of the constituency, the former Coal Board housing stock is in disrepair. Recently, the local press has referred to an estate there being like


Beirut, as it is so bad. There is vandalism and houses have been burnt down and demolished, yet we cannot trace the landlords to clean up the rubbish. Consequently, the rest of the village sees the area as a dumping ground. That has blighted the estate. People who purchased their homes on the Elsecar estate and spent money to make them look decent cannot sell their properties. As I said, some of the landlords cannot be traced, yet mountains of rubbish need to be cleared away.
My hon. Friend the Member for Bassetlaw pointed out what needs to be done. He took advice from housing experts in Mansfield. I urge my hon. Friend the Minister to consider relicensing and compulsory purchase so that local authorities can tackle the problem and restore the dignity of those estates and people can live there in decency.

Mr. Allan Rogers: I wish to introduce a Welsh dimension into the debate, although the Minister is not responsible for housing in Wales, to emphasise that this is a countrywide problem. Fortunately, I live in what might well be the oldest mining community in Great Britain. As a result, there is an enormously high level of owner-occupancy. People bought their houses from the Coal Board many years ago. The houses are terraced and 78 or 80 per cent. are owner-occupied, so the problem of large, rundown housing estates with communal poverty is not quite as acute as elsewhere. There are, however, ex-Coal Board estates throughout the south Wales valleys that are suffering such problems.
In the owner-occupied areas, there is a lack of grants for repair, and some of the housing stock dates back well over 100 years. The houses are little palaces. People have taken enormous pride in building up their homes over many years.
On the newer Coal Board and municipal housing estates, we have the problem that has been so graphically outlined by hon. Members from Nottinghamshire and Yorkshire—the fabric of individual houses is deteriorating. As a result of that and the lack of occupancy, there is general deterioration on the estates. As I said in an intervention on my hon. Friend the Member for Rother Valley (Mr. Barron), that breeds criminality. The kids have nothing to do and are exploited by the drug pushers, who use the empty and vandalised houses almost as resting places in between the times when they peddle their obnoxious trade. It is not just a housing problem, but an enormous social problem. It is not merely neglect of houses, but neglect of people and communities.
Hon. Members representing mining communities throughout Great Britain have seen the great rundown in our communities in the past 10 years as a result of the previous Government's vindictive actions against the coal industry. We represent areas of enormous pride. We do not come to this place with begging bowls, asking for action to be taken. With the present Labour Government, we are certainly not begging but demanding that action be taken. That is why our communities have stayed faithful to the Labour party for so many years. It is not as though we are on the edge and might be able to sway the balance—not that this Government need that in electoral terms. We have a right to a return from this Government for our communities and the Government will neglect our communities at their peril.
Our communities are proud, and they are not, in general, poverty-stricken. They have produced many leaders. The south Wales valley communities have probably turned out more musicians, poets and writers—I apologise to my English friends for being arrogant. In the Rhondda valley alone, we have six or seven brass bands, four or five of which are of championship standard. Some have won the European championship. We have musicians who are renowned all over the world. Leaders and conductors of symphony orchestras have come from the Rhondda valley and its schools, as have poets and actors.
Throughout south Wales, great names in British cultural life have contributed, through either the Welsh medium or the English language. We are proud communities. All we are asking is that some effort be focused back on to the problems that have been created, particularly in the past 10 years.
The Coal Board and the coal owners before it got their pound of flesh out of our communities. For years, we talked about the masters who lived in London. We want some return. I tell the Minister, and through him his colleagues in the Welsh Office who are responsible for housing: we now require them to do something for our communities. For many years, they have contributed to the wealth of Great Britain. Now, our youngsters—our new generations—require a return.

Mr. Christopher Chope: I congratulate the hon. Member for Bassetlaw (Mr. Ashton) on raising this important subject. This debate is a supreme example of how difficult it can be to translate the good intentions of politicians into practical solutions. Indeed, it is almost a case study on the diminishing returns of good intentions.
This is indeed a debate about rural communities and the quality of life of those who live in villages built around coal mines that have closed down. When I was a Housing Minister, in the late 1980s, I had the privilege of visiting Mansfield and Bolsover. I still have on my wall a presentation that I received from Bolsover district council showing the Creswell crags.
I am reminded of that visit because I had high hopes following it. I had seen the extent of the dereliction and disrepair that were the inheritance of the nationalised Coal Board. I saw the high hopes of people in those rural communities, who were exercising their right to buy and hoping that housing associations and new landlords would reinvigorate the housing in those areas. It is therefore distressing to hear about the sheer magnitude of the waste of valuable housing resources that the debate has highlighted and of the human misery generated among responsible householders who are locked into a deteriorating environment.
The debate takes me back about 19 years when I was the chairman of a housing committee in a borough that inherited 1,066 empty, vandalised and squatted houses from an old Labour council, which had believed in public housing and despised private investment in housing. That council wanted more and more control and regulation. Those public sector solutions were manifestly unsuccessful in the London borough of Wandsworth in the 1970s. My experience makes me extremely sceptical about some of the solutions that are being canvassed by Labour Members. We hear about more compulsory


purchase powers, more penalties for private landlords and more local authority ownership. Such policies are no more likely to be successful in future than in the past.
It was interesting to hear the hon. Member for Bolsover (Mr. Skinner) praising the idea of vetting procedures. There was cross-party political consensus for many decades that we should move away from such procedures. I have in mind the old housing associations that used to have vetting procedures. Council tenants in Wandsworth and Southampton used to tell me that, when they first became tenants, they had been vetted and approved. They had demonstrated how responsible they were, only to find that people moving into the house next door were quite the reverse. I am delighted to hear that there is a move back to vetting procedures. They are, of course, entirely at odds with much that is contained in the Housing (Homeless Persons) Act 1977.
I was interested also in the comments about housing benefit. If the benefit were paid at a higher level, it is clear from what the hon. Member for Bassetlaw said that at least houses would be occupied—perhaps they would not be occupied by ideal tenants, but they would be in use. As soon as housing benefit was reduced, landlords said, "It is not worth our while bringing these houses into use." Houses have become empty and derelict as a consequence of vandalism. The message is that, if we try to buck the market, we end up in the counter-productive situation of housing stock not being used when we know that there is a crying need among many people for housing.
This is an important debate, and I look forward to hearing how the Government think they will solve the problems that have been highlighted.

The Minister for London and Construction (Mr. Nick Raynsford): I congratulate my hon. Friend the Member for Bassetlaw (Mr. Ashton) on securing the debate, thereby giving us the opportunity to debate a subject of real concern to many people living in former mining areas and in some continuing mining areas. The economic and social problems of such areas are of great concern to the Government. We recognise especially the specific problems that are associated with some of the housing that was previously owned by the National Coal Board.
We have heard a series of disturbing stories setting out a catalogue of neglect and mismanagement. Examples have been presented of communities exploited by unprincipled absentee landlords. That is serious cause for concern, and we are determined to ensure that more effective action is taken to tackle and resolve these problems.
As my hon. Friend the Member for Bassetlaw explained, in the 1980s the Coal Board, under pressure from the former Conservative Government, began a programme of disposal of its homes, which at the time consisted of about 80,000 units. Within the North Nottinghamshire coalfield, about 1,800 were purchased by a consortium of housing associations; others were purchased by local authorities. Mansfield district council holds about 490 former NCB properties. Other properties were purchased by their former tenants, while some were purchased by private landlords, often buying in job lots at auction.
Warsop Vale, the area about which my hon. Friend the Member for Bassetlaw spoke at some length, was built at the turn of the century for workers at the nearby Warsop pit. Of the 200-plus houses in the village, 88 were purchased by Ashfield Nominees Ltd., a company under the Dennis Rye organisation. About 30 others are in the ownership of smaller private landlords. More than half the houses in the village are owned by private landlords. The remainder were purchased by former NCB tenants, who purchased their own homes.
The Government are extremely concerned about the problems of disrepair in the nation's housing stock. In the wider context, we are encouraging local authorities to make every effort to ensure that owners of unfit properties take remedial action without resorting to enforcement powers. Renovation grants and home repair assistance are available at the discretion of local authorities to help home owners on low incomes to improve their properties. However, owners have a responsibility to maintain their own properties, and local authorities are under a statutory duty to enforce the housing fitness standard. We are reviewing the housing fitness standard and enforcement procedures and we shall publish a consultation paper in the autumn.
Authorities have a range of enforcement options at their disposal. Where a local authorities identifies a property as unfit against the requirements of the standard, it must come to a decision and take one of the enforcement options as the
most satisfactory course of action
for dealing with the property.
These options are, first, to serve a repair notice specifying the repairs required to make the property fit; secondly, to make a closing order prohibiting residential use of the property; thirdly, to make a demolition order or to declare the area in which premises are situated to be a clearance area; and, finally, to serve or renew a deferred action notice. Such a notice specifies the repairs that are required to make the property fit, but shows that no immediate enforcement action will be taken. In reaching a decision about which of these options is the most satisfactory course of action, a local authority is required to have regard to the statutory code of guidance for dealing with unfit premises set out in circular 17/96.
My hon. Friend the Member for Bassetlaw raised several important technical issues suggested by Mansfield district council that affect its ability to operate the procedures that I have been describing. I hope that my hon. Friend will appreciate that, on technical issues of this nature—I received notice only today—it is not possible for me to give him an immediate response. I shall carefully consider all the points that he raised, and I shall write to him.
Some of the properties in the area of which my hon. Friend spoke are now owned by housing associations. About 10 years ago, a consortium of associations bought about 1,700 tenanted properties from British Coal with a mixture of housing association grant and private finance. In the late 1980s, a policy was drawn up to the effect that housing association grant should not be made available for the acquisition, improvement or repair of tenanted stock transferred from public sector landlords to housing associations. The previous Administration refused to review that policy, which therefore made it impossible


for social housing grant to be made available to housing associations to carry out works to former Coal Board property passed to them.
I have asked officials in the Department of the Environment, Transport and the Regions to conduct a review of the application of social housing grant for the improvement of such properties owned by housing associations. We need to consider the extent to which acquisition costs could reasonably have been expected to reflect the need for future work to the stock. That is why we need some consideration of these issues before reaching a decision. We are reviewing the application of policy and I expect to be able to make some announcement before too long on whether there will be a variation of the previous policy.
I recognise that the problems that concern my hon. Friend the Member for Bassetlaw are predominantly those that relate to properties that are owned by private landlords. In principle, we value a revived private rented sector. It has important and positive role to play in meeting part of the country's housing needs. All too often, it is the sector with the greatest problems of disrepair.
I welcome the fact that many local authorities have established regular liaison forums with the private landlords in their area. These are proving valuable both to landlords and to the local housing authorities, whose job it is to ensure that local housing needs as a whole are met. That sort of co-operative arrangement with decent landlords is to be applauded. It will not work, however, where landlords are unwilling positively to participate in tackling the problems of their area. The Government will have no truck with any exploitative slum landlord who is not interested in providing reasonable quality housing at a reasonable rent.
To deal with these problems, we are committed to introducing a compulsory licensing system for houses in multiple occupation, as the worst conditions in the private rented sector are generally found in such properties. We are drawing up a framework for a licensing scheme so that we can be ready at the earliest legislative opportunity. We expect to issue a consultation paper later this year.
My hon. Friend suggested that the consultation paper should be extended to cover empty properties, such as the derelict homes in Warsop Vale that he described. The Government are not convinced that that would be the most appropriate response, because the licensing of houses in multiple occupation is designed to cope with a situation where a significant number of tenants share the same property and where, as a result, there are particular problems of squalor, and, sometimes, danger because of fire and other hazards.
The issues are very different for empty properties. The licensing framework which we are approaching would not be appropriate for those different circumstances. That does not mean that we are indifferent to the issue of empty properties; indeed, we are extremely concerned about it. I shall say a little more later about our response to empty properties.
I am sympathetic towards the particular problems faced by tenants in Warsop Vale and many other areas. During 1996, Warsop Vale residents association commissioned a survey of properties in the area that were owned by private landlords. The survey, entitled "Stop the Rot", revealed that the wall, floor and roof structures were in generally good condition, but that 36 of the 39 properties

surveyed were unfit for human habitation. Of the 23 full internal surveys carried out, 22 of the properties were found to have conditions prejudicial to health and a cause of public nuisance. That was due to a wide range of design issues, disrepair and dampness, creating hazards or conditions prejudicial to health. However, the surveyors noted that, with moderate investment, the properties could provide good-quality housing for many years to come.
I am pleased to know that Mansfield district council has responded robustly to the report. Between January 1994 and June 1997, the council served 30 notices requiring specific repairs to be carried out to make properties fit. Of those notices, 29 were related to properties owned by one landlord.
However, since the publication of the "Stop the Rot" report, Mansfield district council has stepped up its activity and introduced a policy of inspecting six properties each week at Warsop Vale alone. In the past month, it has inspected 19 properties and served eight "minded to" notices, showing its intention to pursue enforcement action. The council is prepared to fund the costs of the repairs and reclaim them from the landlord through the legal system, and informs my officials that it is confident that it can complete the works within the next two financial years. We are keen that it should continue to pursue this vigorous action to tackle the problems.
The problem of empty properties was also raised. I should say straight away that the Government are determined to bring empty properties that are needlessly neglected back into use by promoting good practice by local authorities and tackling underfunding through the phased release of local authority capital receipts. Local authorities have a key role to play in bringing privately owned empty properties back into effective use in their areas. They are best placed to know where those properties are and who owns them.
Local authorities can deploy a wide range of approaches to get empty properties back into use—from advice to landlords who are simply unaware of procedures and the terms under which they might let, to grants or fitness enforcement procedures, to which I have referred. Solutions may require a corporate approach by local authorities, working in partnership with housing associations, private owners, property professionals and other public and voluntary bodies.
I welcome the fact that local authorities in the east midlands region, with the encouragement of the government office, recently set up an empty homes forum to tackle vacancy rates in the region. I hope that it will provide a sharper focus for tackling the particular problems to which my hon. Friend the Member for Bassetlaw referred.
Another approach to the problems of the properties in Warsop Vale might be for a housing association to buy them from the landlord by agreement, provided that the landlord is prepared to sell at a reasonable price. My hon. Friend suggested that the Housing Corporation has a surplus—I think £3 million was quoted—which could be used for that purpose. That is not correct. The east midlands and eastern regions of the Housing Corporation have between them a reserve, not a surplus, of £3.5 million, but it has been allocated for needs-related expenditure and will be allocated during the year to a number of projects for housing investment. In any event, my understanding is that the landlord is unlikely to be willing to sell on reasonable terms.
That brings us to the issue of compulsory purchase. Local authorities have powers to acquire houses and land, either by agreement or by compulsion, for a variety of reasons. Those include the subsequent transfer of the property to a third party, such as a housing association that intends to provide housing accommodation on that land. In theory, that would enable the council to acquire the buildings and set in motion procedures for their improvement.
Let us not forget in this consideration of a particularly hard case that compulsory purchase is a draconian power, and should be used only as a last resort. Moreover, it is not always the most cost-effective means of solving a problem. It must be for the local authority to decide the most appropriate way of tackling the problem. We do not propose to dictate to local authorities; it is for them to decide the most appropriate solution. However, where other options fail, where properties are left needlessly empty and local authorities believe that compulsory purchase is appropriate, the Government will not stand in the way.
My hon. Friend discussed the issue of valuation and suggested that site value might be a more appropriate basis on which to base compensation. I should explain that the Land Compensation Act 1961 provides that owners of land expropriated by compulsion should receive its open-market value—the amount that the owner would have received had the transaction occurred between a willing seller and a willing buyer in an open market. That is a fair basis for compensation, and it is used worldwide.
It would be wrong to expropriate property without any compensation—compulsory purchase order procedures do not provide for that—but we should bear it in mind that, in the instances that we have been considering, open-market values could be very low indeed, possibly even lower than the site value, where the property is derelict and where costs are associated with clearing the property if it cannot be used. It is not necessarily an advantage to value properties for compulsory purchase on a site valuation basis. The open-market valuation for derelict properties may be very low indeed.
The problem with many of the options that I have described is the resources available to local authorities to be able to carry out necessary works. We recognise that, under the previous Government, resources provided for housing were cut savagely year on year. The Government

are committed to redressing the chronic under-investment in housing. That is why, immediately after the election, we made a capital receipts initiative one of our priority actions. Under the initiative, we are providing local authorities in England with an extra £174 million this year and an extra £610 million next year.
These resources will be directed at housing and associated regeneration needs, and will be available for both public and private sector housing. I should stress, however, that in the first instance it will be for individual authorities to determine where the local needs and priorities lie and to direct resources accordingly. We do not propose to impose a rigid central diktat on the application of the resources, but we expect authorities to apply them efficiently, economically and effectively. We have consulted on this matter.
A consultation paper has been issued. We will listen to the responses. If local authorities in the areas that we have considered this morning believe that it would be appropriate for those resources to be used to help to bring back into use properties that are neglected and to raise the standards of derelict and sub-standard properties, it is my view that that would be an appropriate use of the capital receipts released.
A number of my hon. Friends spoke in the debate. I do not have time to refer in detail to all the comments. My hon. Friend the Member for Bolsover (Mr. Skinner) highlighted problems relating to Pleasley and Creswell, in his area. Those are similar to the problems of which we heard from my hon. Friend the Member for Bassetlaw.
We shall take a detailed look at the problems raised by my hon. Friend the Member for Bolsover, relating to weaknesses in the current procedures under which local authorities wishing to enforce the law are frustrated by delays caused by landlords. As part of our review of the fitness standard and the enforcement procedures, we will consider the points raised by my hon. Friend.
My hon. Friend the Member for Rother Valley (Mr. Barron) highlighted problems in properties on estates in Aston, Kiveton Park and Maltby that were sold by auction and acquired by owners with addresses as far away as Wimbledon and even Baghdad. He revealed a deplorable catalogue of neglect and dereliction. We are keen to see action in his area, as elsewhere, along the lines that I have outlined.

Mr. Deputy Speaker (Mr. Michael Lord): Order. We must move to the next debate.

Manchester Airport (Second Runway)

Mr. Martin Bell: I am grateful for the opportunity to talk about an issue that is very important to many of my constituents. I promise to be brief, both because I believe in brevity and to allow other hon. Members—including some with a long involvement in the issue—to have their say.
This is not a routine debate and its subject is not a routine issue. I represent many dismayed people who feel that their land and their homes are being taken from them against their will without sufficient reason. The hour is late; the official inquiry went against them and the heavy equipment will be moving on to the site any day now to begin the work of construction and, it must be said, destruction.
We are the small platoons up against the big battalions. Only one statutory body is left standing in the field and fighting in the last ditch: Mobberley parish council. The council has gone to the European Commission with a complaint that deserves—and, indeed, is receiving—a hearing: that the funding of Manchester airport with public money infringes the treaty of Rome by distorting competition within the European Community. Government money is luring airlines to Manchester that would not otherwise fly there.

Mr. Graham Stringer: Does the hon. Gentleman accept that, although Manchester airport is in the public sector, no public subsidy has been provided by the town authorities that own it? They have lent the airport money borrowed from the public works loan board—which could have been borrowed from any other source on commercial grounds. The parish council's case is that a subsidy has been provided, but it has not.

Mr. Bell: The European Commission is now reviewing the position and will make a decision.
In its complaint, the parish council cites an agreement between Manchester airport and Continental Airlines to offer slots for five years in return for landing fees at less than the market rate and a roughly similar agreement with American Airlines. There is a pattern of development that is promoting Manchester as the Heathrow of the north. While that may seem a laudable municipal ambition, it carries certain consequences, one of which is Manchester's probable expansion at the expense of other airports. Another is that 1,000 acres of Cheshire countryside will be sacrificed. That is not the march of progress; it is the march of conflict.
A further consequence is that the travelling public—who could travel more conveniently, especially on charter flights from other regional airports such as Liverpool and Leeds-Bradford—will take the long journey to Manchester, putting a further strain on a road system that is already close to gridlock for much of the time.
The figure of 50,000 new jobs was originally conjured out of a hat. On cross-examination, that figure fell to about 8,000. Many of those jobs would be created by the continuing expansion of the airport within its existing boundaries and the concentration of traffic in Manchester will clearly be to the disadvantage of Liverpool. The planners talk of disbenefit to Liverpool. That means damage and the possible loss of jobs.

Mr. Stringer: Does the hon. Gentleman accept that the growth of Manchester airport that was projected at

the planning inquiry—it was forecast that 30,000 people would use it in 2005—will create more jobs in Liverpool and the Merseyside area than any proposed immediate expansion of Liverpool airport?

Mr. Bell: I am coming on to the projections of passenger growth—and I think that the hon. Gentleman means 30 million people, not 30,000.
Refusing permission for the expansion of Liverpool airport, the Deputy Prime Minister said that this was by no means the end of the story. He added that he intended to take a close look at the role of regional airports in contributing to regional development—but the time to do that, surely, is before the Bollin valley has been concreted over, not after.
Much of the debate—this will be familiar to the House—depends on forecasts of future traffic. The figures in those forecasts have not been rising so fast lately. A more plausible figure for the year 2005 at Manchester airport is 20 million. Today Gatwick airport handles more than 20 million passengers a year on one runway, and it expects to be able to handle 35 million on one runway by 2012. Gatwick is a model example of what can be done with one runway. If Gatwick can do it, why cannot Manchester?
The argument is not about process and procedure, although we may well wonder about the fairness of a system that allows one side to outspend the other in the planning period by a factor of more than 10 to one. The argument is about the best way in which we should now proceed. The inspector accepted that the second runway was an inappropriate development of green-belt land and would be harmful to it and that such development could be approved only in exceptional circumstances, which he set out.
I submit that we now have a new special circumstance: the election of a new Government who are committed to an integrated transport policy. The Deputy Prime Minister emphasised that again on Monday, when he said:
Integration is a serious matter—not a buzz word. It is about how we can use existing capacity better than we do at present. It is about putting things together so that the whole is better than the sum of the parts".
The second runway at Manchester has nothing to do with an integrated transport policy. I argue that it has more to do with a disintegrated transport policy. Manchester may well prosper at the expense of other airports. Its development was not considered with that of Liverpool, or that of the region's road and rail system; it was considered separately. If we are to have an integrated transport policy, let us have one, and let us consider—even at this late stage—whether the loss of the Cheshire countryside is in any way justifiable.
The Minister may consider that hands are tied by the last Government's decision and the result of the public inquiry, but there is the option of switching charter flights, above a certain limit, from Manchester to other regional airports, particularly Liverpool. That would relieve congestion at Manchester during the rush hours and help the development of other airports. Exactly that kind of action was taken in the early 1980s, when charter flights were redirected from Heathrow to Gatwick, and it started the regeneration of Gatwick. If such action could be taken then in the south of England, it can be taken now in the north.
Even in the present circumstances, the suggestion that Manchester's traffic growth exceeds its capacity is hard to square with common observation. I have received a letter from one of my constituents, a British Airways captain who flies out of Manchester and sees it more closely than most people, who states:
My daily experience of airport operations makes it abundantly clear that the airport's existing runway is under-utilised. For extended periods, there are few, if any, aircraft movements.
The case for a second runway is not convincing. Those who walk the local fields and footpaths, as I did last weekend, between fences of a size and complexity that I have not seen since the end of the cold war, will wonder how convincing that case can be. In fact, there is no sufficient case, but there is every case for a pause and a review of airport and road and rail policies. Those policies hang together, or they fail together.
It would be useful at this point to pre-empt and answer the charge of NIMBYism. That unappealing acronym now has a different meaning: "not in Manchester's back yard". This is not a case against Manchester; it is a case for Manchester. Manchester must breathe, and the Cheshire green belt is one of its lungs. The development of the second runway will damage its lungs, and that damage cannot be made good.
Let us also counter the arguments that can and will be advanced about the necessary action of mitigation and damage limitation. Bats and badgers will be rehoused, hedges will be planted and ancient woodland will be replanted. We are promised the greatest migration of forestry since Birnam wood came to Dunsinane. This is about people, however. It is also about woodlands: ancient woodlands cannot be transplanted, but they can be destroyed.
The victims, however, will be people, such as those whose homes will be taken from them. There are two people observing this debate whose 17th-century farmhouse with its landscaped garden will go under the end of the runway. People have security guards living in their outbuildings, but no compensation has yet been agreed. The victims will be the people whose farms, footpaths and fields will be taken from them and the people who live beyond the perimeter of the new runway and who are unable to sell their homes, so they are, in effect, prisoners of their own property. Altogether a quarter of a million people will be affected by the noise and the extra risk factor associated with the second runway.
Those figures are not small. Behind these large issues lies the even larger issue of what kind of people we are. Are we the kind of people who will promote one airport at the expense of others? Are we the kind of people who will concrete over our inheritance? Or are we the kind of people who will pause to think, even at this late hour, and save what needs to be saved?
I have seen too much destruction in my previous life to condone it in this one. I have seen too much indifference to be indifferent now. I believe that we should pause, reflect and start anew.

Mr. Paul Goggins: I am grateful for the opportunity to speak in this brief debate, and I thank the hon. Member for Tatton (Mr. Bell) for his

approach to it and for allowing time for other hon. Members to contribute. I congratulate him on the result on 1 May. Although we disagree on this issue, I acknowledge that he represents his constituents with honesty and integrity.
Half of runway two will be in my constituency, in addition to the two terminals and the 280 businesses that currently constitute the commercial community of Manchester international airport. The hon. Member for Tatton expressed his view and the views of a number of his constituents, but there is another view on runway two, which was endorsed by the inspector after a public inquiry that lasted more than 100 days and took evidence from 180 witnesses. That view is backed by the whole of the region's business community and, according to a recent MORI opinion poll, supported by 80 per cent. of local residents. I also support the view that the decision to go ahead with runway two is the most important strategic decision that has been made in the north-west region for decades, and that the extra capacity that will flow from that decision will unlock the region's economic potential and make the north-west a focal point in the global economy.
I must dispute some of the figures that the hon. Member for Tatton gave. The current and projected rate of growth in air passenger travel will result in 30 million passengers passing through Manchester airport by 2005, not 20 million as he stated. That is double the current rate. With those additional passengers will come 15,000 new airport jobs and as many as 35,000 further jobs elsewhere in the region. Those figures were not plucked out of a hat, as the hon. Gentleman said, but are well researched and well founded projections.
Some 2,000 of my constituents who live barely a mile from Manchester airport are out of work. Some of the young people in Wythenshawe, whom I represent, are third generation unemployed. They have given up hope of ever finding a job. The hon. Gentleman described the people of Tatton as concerned and dismayed. I ask them to put themselves in the place of those unemployed people and to imagine what it is like. Runway two may be their only chance of ever finding employment.
The least well known aspect of the £172 million investment, of which runway two is a part, is the environmental mitigation package, which the hon. Gentleman acknowledged. The eco-warriors labelled it as window dressing, but it will mean more ponds, new hedgerows and new grasslands and woodlands. Manchester airport has a 15-year management plan, so those 850 acres of countryside will be protected.
No one wants unwarranted destruction of the environment, but sustainable development requires social cohesion and economic progress as well as environmental protection. I believe that the plans for runway two have all three elements.

Mr. Graham Stringer: I welcome this opportunity to put arguments in favour of the second runway and the development of Manchester airport, in addition to those put by my hon. Friend the Member for Wythenshawe and Sale, East (Mr. Goggins).
The essence of the case made by the hon. Member for Tatton (Mr. Bell) was that the extra traffic could be diverted to Liverpool airport and that the people of Merseyside would welcome that. He misunderstands European law and the freedom of airlines to travel where they want. Neither United Kingdom nor European law provides a power to tell airlines to land at Liverpool when they want to land at Manchester. If there were such a law, I hope that the hon. Member for Tatton would oppose it. Why should people who want to fly from Manchester have to go to Liverpool or anywhere else?
Airlines use airports because of the facilities that they offer. They can benefit from being able to transfer passengers to other airlines. In cities around the world, such as Glasgow, Toronto and Washington, attempts to run two airports separately have failed, and they have had to be amalgamated.
It was often said during the inquiry that Liverpool airport could be used instead of a second runway. If passengers were changing planes, even if a new route were built, would they want to arrive at Manchester and then take the train to Liverpool? I suspect that they would not welcome that.
I wish Liverpool well. I welcome the Deputy Prime Minister's statement on Monday that Liverpool and Manchester airports should work together for the benefit of the whole region, but it should not be done by some dictatorial distribution of traffic, which I believe would be unlawful.
The opponents of the second runway often use contradictory arguments. I am afraid that the hon. Member for Tatton falls into the category of people who say that demand is insufficient to justify the expansion of the airport. Other people argue that demand will grow too much, that the airport is not used efficiently enough, or that it is too efficient.
It has been argued that Gatwick can manage 35 million passengers on one runway. The aircraft that use Gatwick are larger. Jumbo jets use Gatwick in a way and in a mix that is not possible at Manchester. If Manchester could accommodate as many large aircraft, it could manage with one runway. Flights from Manchester are mainly short-haul to other parts of Europe and the United Kingdom, so jumbo jets do not fly from Manchester to Schiphol or Glasgow. Smaller aircraft require a greater number of movements and have fewer passengers.
An opinion poll carried out four years ago in every constituency in the north-west of England, including Tatton, showed majority support for the second runway because of the benefit for jobs. An opinion poll carried out in January showed majority support in every constituency except Tatton, where there was a small majority against it. People in the north-west know that the second runway would produce more jobs than any other investment in the whole of the north of England.

Mr. Robert Sheldon: I have only 60 seconds. I listened carefully to the speech of my hon. Friend the Member for Tatton (Mr. Bell). I call him my hon. Friend because he should have hon. Friends on both sides of the House, given the way in which he entered Parliament. He is ably looking after his constituents, and I understand that well. My home, where I have lived nearly all my life, is probably nearer to Manchester airport

than the homes of many of my hon. Friend's constituents. I understand the problems, but it is important to have an international airport north of London, and Manchester has such an airport. It is the only such airport outside the south of England, and it is more important to the whole of the north of England and even to Scotland than some of the others that have been mentioned, which are feeder links to London. However, Manchester airport stands on its own. To reverse the move to the south, Manchester should have its second runway.

The Parliamentary Under-Secretary of State for Transport (Ms Glenda Jackson): I congratulate the hon. Member for Tatton (Mr. Bell) on raising an issue that is important not only for his constituents but for all those who live and work in the north-west. I thank him for his generosity in allowing time for contributions by my hon. Friends the Members for Wythenshawe and Sale, East (Mr. Goggins) and for Manchester, Blackley (Mr. Stringer) and by my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon). They underlined my point that the issue is of great importance to the whole of the north-west.
Manchester airport is already the 18th busiest in the world, and handles more international passengers than Chicago's O'Hare airport. The proposal to build a second runway inevitably involved a wide range of aviation, economic, environmental and other issues and it became one of the biggest planning issues of the past decade. The Secretary of State at the time decided to call in the proposal because of its regional and national importance. A nine-month public inquiry was held from June 1994 to March 1995, at which parties that supported and those who opposed the runway gave evidence. Some 15,000 written representations were also taken into account. The inspector reported in August 1996 and recommended that planning permission should be granted. The then Secretary of State announced the granting of such permission in January this year.
Since the decision, opposition to the new runway has continued, and the Government have received numerous requests to revoke or review the decision. We have taken those requests seriously and examined the issues carefully. As a Cheshire girl, I would never have considered accusing the hon. Member for Tatton or any of his constituents of NIMBYism. We have concluded that it would be wrong to reopen the decision.
I am grateful for this opportunity to comment on some of the issues that were raised by the planning application, but I shall first give a brief outline of the policy background. We are committed to bringing together transport and environmental decision-making. My right hon. Friend the Secretary of State announced in the House on 5 June that we had launched a fundamental review of transport policy to provide an integrated transport system that meets the environmental and transport needs of all regions for today and the future. The review will look at short and long-term actions that are necessary to deliver an integrated transport system, and we aim to publish a White Paper in the spring. Its publication will mark the initial analytical goal setting and consultation phase in the development of that policy.
The hon. Member for Tatton spoke about possible investigation by the European Commission. There is no official investigation by the Commission. The current position is that it has asked the United Kingdom for comments on a dossier of papers that was provided to it. My Department is considering the dossier and will reply shortly. It will then be for the Commission to decide whether to take the matter further.
The accusation of state subsidy to British Airways relates to new facilities that are currently being constructed in terminal 1. The airport company agreed with BA and the other users of terminal 1 to redevelop the terminal following the opening of the first phase of the new terminal 2. The planning of that redevelopment has concentrated on increasing capacity, providing better facilities for passengers transferring between domestic and international flights and increasing the amount of retail space.
The first element of the redevelopment was a hub facility for Lufthansa and its partners. It opened last summer. Elements of the retail development are opening this summer. The final element is a new pier and associated facilities attached to the domestic part of the terminal which, in combination, will enable British Airways to combine its domestic and international operations in one part of the terminal. British Airways will not have exclusive use of those facilities. The airport company's arrangements with BA are consistent with the principles of the arrangements with other airlines for customisation of airport facilities. Airport charges will remain the same for BA as for all other users of the airport, as was explained to the Monopolies and Mergers Commission as part of the economics of the airport's charges.
Manchester airport has experienced sustained long-term growth in demand. It has retained its position as the UK's third busiest airport and has increased its market share over the years from 8 per cent. of all UK airport traffic in 1983 to 11 per cent. in 1993. It expects demand to grow from 12.9 million passengers in 1993 to 29.4 million in 2005, if the second runway goes ahead.
Even if the airport were restricted to one runway, demand is still expected to grow to 22.8 million passengers by 2005. However, the constraint of having only one runway would mean that there would be more pressure to find slots in off-peak times and more inconvenience to passengers. The inquiry discussed whether there could be other ways to meet the demand and decided that there was no other clear solution. The inspector recommended that there was no guarantee that demand could be diverted from Manchester airport, if it were restricted to one runway, to other northern airports.
The hon. Member for Tatton spoke about the issue that was raised by some objectors—the possibility of expanding Liverpool airport as an alternative to building a second runway at Manchester. A separate planning inquiry was held into proposals to expand Liverpool airport, as each of the Manchester and Liverpool proposals raised its own aviation, economic and environmental issues. My right hon. Friend the Secretary of State for the Environment, Transport and

the Regions recently announced that planning permission had been refused for the proposed expansion of Liverpool airport.
There is nothing that I can add to that decision other than to reiterate that those proposals would have caused more environmental harm than was justified by the need. We hope that Manchester and Liverpool airports will develop in a co-operative and complementary way. That is clearly a matter for the Manchester airport management to discuss with Liverpool airport's new owners.
The hon. Member for Tatton referred to the destruction that he has seen, and said that the central issue of the debate relates to people. As my hon. Friend the Member for Wythenshawe and Sale, East said, we have seen the destruction not only of the environment but of people brought about by economic decay. That is why the runway is so important to the whole of the north-west. The airport management has calculated that its planned expansion will lead to the creation of an extra 50,000 jobs by 2005, either directly or indirectly, compared with 1993. Some 18,000 of those jobs will be attributable to the second runway rather than to some other aspect of airport expansion. We are aware that objectors have queried those forecasts, and we do not necessarily subscribe to any one set of forecasts, but we agree with the inspector's conclusion that the only real dispute is over the scale of the impact.
We are confident that the growth of Manchester airport can be achieved in line with the principles of sustainable development. The public inquiry concluded that airport expansion should not lead to extra urbanisation as there should be sufficient capacity in the conurbation to accommodate the new jobs and the extra work force. We are pleased to see that the airport authorities have entered into a commitment to increase the proportion of passengers using public transport, hopefully to 25 per cent. We have given a grant to the airport for a new rail siding so that construction material can be brought to the site without disturbing the local community.
The second runway is in the green belt and is not the sort of development that would normally be appreciated in such a belt. I have two comments about that. First, national green belt policy allows exceptions in special circumstances and the previous Secretary of State considered that the need for the runway and the economic benefit that it would bring constituted special circumstances in this case. Secondly, the decision does not represent a general relaxation of green belt policy.
The benefits that the second runway will bring to the north-west must be weighed against local environmental impacts—the hon. Member for Tatton made several points on the issue—principally on the local ecology and landscape. A development of this type and scale will inevitably have some impact on the area, and that should be taken into account in any planning decision.
The airport management has drawn up an impressive environmental mitigation package that won the endorsement of English Nature, the statutory advisers on ecological issues, and that persuaded Cheshire county council to drop its objections to the planning application.


The package includes the replacement of ponds and hedgerows and improved management of the ponds and hedgerows that will remain in place—

Mr. Deputy Speaker (Sir Alan Haselhurst): Order. I hope that hon. Members will have noted the difficulty in half-hour Adjournment debates secured by one Member: interventions may prevent a full reply from the Minister.

Measles Vaccines

1 pm

Mr. Llew Smith: Jonathan Swift once said:
Falsehood flies, and Truth comes limping after it; so that when Men come to be undeceived, it is too late, the Jest is over, and the Tale has had its Effect".
How true that was and will be, as evidence is increasingly uncovered highlighting the potential implications of the rising incidence of autism and Crohn's disease in children, and the uptake of the mumps, measles and rubella and the measles and rubella vaccines. Indeed, the evidence shows that it is the cocktail of vaccinations that is likely to be the cause of the unexpected problem.
In the past two years, I have tabled dozens of questions and was granted an Adjournment debate on problems relating to measles and rubella vaccinations—problems ranging from lack of adequate information to parents and the possible side effects of the vaccinations to the damage itself. Over that period, I have become increasingly critical of the procedures and the side effects on some children from those vaccinations, but even my cynicism was stretched to breaking point when I read that in the latter part of the 1950s in the United States, and in the United Kingdom in the early 1960s, Down's syndrome children were used as guinea pigs in tests involving live measles vaccines. At that time, those living in the institutions concerned were described as "sub-normal".
Those tests were recently brought to the public's attention as a result of an article in The Sunday Telegraph by Victoria Macdonald, highlighting much of the research by solicitor Richard Barr and consultant Dr. Andrew Wakefield. In the past couple of weeks, articles in the Irish Independent also raised the issue. Their author, Brian McDonald, reported:
Children, some of whom were either mentally or physically handicapped, were used in drug trials carried out in Irish orphanages over twenty years ago.
Some people, while deploring what happened in the 1950s and 1960s, may attempt to justify it on the basis that at that time we knew no better, but that is not a satisfactory explanation. For instance, Dr. Richard Nicholson, editor of the Bulletin of Medical Ethics, stated:
People try to say that you cannot apply the same ethical standards today as you could in 1960. You have to do the research with the proper safeguards in place and the safeguards were there in 1960, but it was largely ignored by the doctors.
Dr. Wakefield of the Royal Free hospital stated:
this is both a practical and ethical issue. You cannot extrapolate from brain damaged children to normal infants.
The response by Jackie Fletcher, who set up the national organisation JABS—Justice Awareness and Basic Support—when her child was severely brain-damaged after one of these vaccinations, said:
The more I go into this, the more horrific it becomes".
We should be horrified, because, as Victoria Macdonald stated in her article:
babies and young children with Down's Syndrome were used as guinea pigs by British doctors in 1960 to test an experimental vaccine for measles … children who were living in institutions for the "severely subnormal" (as they were then described) were


subjected to the experiments because the doctor said it was "useful" having them in hospital where they could watch over them for adverse reactions.
She went on to state:
one of the children died seven days after being vaccinated from a common side effect of measles, but the doctors described it as coincidental in their reports.
From an ethical point of view, tests such as those carried out in the UK in 1960 on Down's syndrome children—some of the most vulnerable people in our community—should never have taken place, because those children did not have the ability to say no. Because of their mental condition, they were passive recipients of the tests or anything else one wished to inflict on them. If we are to be worthy of the description "civilized", we can never condone those acts; otherwise, we debase our humanity. We hear of other instances, where people with severe learning difficulties have been taken advantage of; we have rightly condemned those acts and must continue to condemn them, but we must also ensure that we learn from our mistakes.
On the practical side, Dr. Wakefield argues that there are several factors which make that population
entirely inappropriate for studies designed to detect adverse neurological events to measles vaccine.
He states:
The susceptibility of the damaged brain to acute and delayed adverse events to measles or measles vaccine is unknown, although this may be altered when compared with the normal brain.
It was inappropriate and potentially hazardous, therefore, to extrapolate from that series of studies that the vaccines would be safe for the general population. The period of observation was limited to three weeks maximum in any one study, which is far too short a time either to detect or to exclude all adverse effects on the central nervous system.
The question we have to ask is what lessons have we have learnt from the mistakes of the early trials. The inadequacy of the three-week safety trials, particularly in relation to children with Crohn's disease, is highlighted by Dr. Wakefield, who states that there may be a diagnostic delay of up to two years. Indeed, he goes on to say that there
have been no prospective studies of measles vaccine safety beyond the initial 3–4 weeks follow up period … Beyond this time, safety was assumed. It is notable that trial cohorts from 1964 continue to be monitored for vaccine efficacy 31 years later. It is also notable that in 1995 it was possible to use the same trial cohort to examine a possible link between measles vaccines and inflammatory bowel disease.
Those points were also made by Thompson writing in The Lancet in 1995.

Mr. Don Touhig: As my hon. Friend knows, I have some knowledge of the problem of Crohn's disease, as my eldest daughter has been a sufferer for the past 10 or 11 years. Will my hon. Friend comment on the case of David Lawrence, a young constituent of mine who had a measles vaccination in 1994 and became very ill with a serious virus about 10 days later? Over the past two years, he has gone from being a healthy, fit young lad to a weak and sickly young lad. Three weeks ago, he

was diagnosed as having Crohn's disease. His family are convinced that all his medical problems stem from that vaccination.

Mr. Smith: Solicitors and consultants involved with this work have received hundreds of similar complaints about children who have ended up with either Crohn's disease or autism. What saddens me is the response of the medical profession, which more often than not implies that there is no relationship between the vaccination and autism or Crohn's disease. People in the profession often say, "These are merely scare stories," but the example that my hon. Friend has given is repeated in my constituency. Within an hour of the measles vaccination, a young girl became seriously ill, and a couple of years later she is having treatment for autism and Crohn's disease. There are not just one or two cases: there are hundreds of cases.
Vaccine experts state:
standard dose "further attenuated" measles vaccines are among the safest vaccines in use today".
Although the implication of that statement is that live measles vaccines are safe, it is of course relative and meaningless if safety trials of other vaccines were as inadequate as those conducted on measles vaccines.
No one denies the benefits of vaccinations, but what about the risks? Vaccines should be safe. The children are not ill; they do not have any disease when they are vaccinated. Vaccines are given as a preventive measure. The only acceptable side effects of a vaccine are those which produce no long-term damage. More than 800 families have now contacted solicitors or support groups in the belief that their children have been seriously damaged by vaccines in the same way as the child referred to by my hon. Friend.
It is worth noting that Crohn's disease among children was unheard of 15 to 20 years ago. What safeguards were in place to monitor the risks of two-dose vaccine schedules, which had been highlighted as of particular concern to international measles virus experts in the early 1990s? There was none—safety was assumed on the basis that certain Scandinavian countries, such as Sweden, had been administering two doses of measles vaccine for some years. But had Sweden or any other Scandinavian country ever conducted any safety trials of two-dose measles or measles, mumps and rubella vaccines? No, they had not.
We cannot make assumptions about the safety of the administration of, or exposure to, live biological agents. How many times in recent years have we been reminded of that fact, whether it be in relation to the Gulf war, BSE or E. coil? The chief medical officer, Sir Kenneth Calman, claimed in the Daily Telegraph on 5 December 1996 that Britons were dangerously blasé about disease. Unfortunately, the assumptions made by his Department about the safety of a second dose of measles vaccine show that the Department was equally blasé.
The Department of Health claimed that the procedure was safe because it had been given to millions of children world wide. That is not a qualification of safety. Thalidomide was given to thousands of women, but that did not make it safe. Dr. David Salisbury, principal medical officer for vaccines, had ample warning of potential problems as early as 1992. Indeed, these points have been made on many occasions to officials at the Department of Health. Unfortunately, I suspect that those who were advising the previous Government are now advising the Labour Government.
We should contrast the Government's policy on reviewing the possible negative health effects of the MMR vaccination campaign on some children with the rapid way in which Ministers have rightly intervened to support the alleged victims of Gulf war syndrome.
The previous Government tried to deny and then to avoid all responsibility for Gulf war syndrome. Yet when it comes to initiating a widespread review or reassessment of the MMR-MR vaccination campaign, Labour Ministers are sticking to the same policy reassurances as their Conservative predecessors. For example, in 1995 Tom Sackville, the then Conservative Minister, said in a written answer to me:
There is already a well-established satisfactory system in place for monitoring adverse reactions to all medicines, including vaccines.—[Official Report, 6 November 1996; Vol. 265, c. 610.]
More recently—on 22 May—in a written question I asked the Secretary of State for Health whether he would
establish a review of (a) the effectiveness of and (b) side effects arising from the most recent national MMR vaccination campaign.
The Minister for Public Health replied:
The effectiveness of, and side effects arising from, the 1994 measles/rubella (MR) school-based immunisation campaign have been carefully reviewed … The campaign was very successful."—[Official Report, 22 May 1997; Vol. 294, c. 174.]
Essentially, her reply was the same as that given by the Conservative Minister.
I want to restate the need for an independent commission to study the possible links between MMR and MR and Crohn's disease and autism in children. I have been advised that work done in America by Dr. Hugh Fudenberg and Dr. Gupta, and in the United Kingdom by Paul Shattock of the University of Sunderland, demonstrates the link between vaccine damage and autism. I urge my hon. Friend the Minister to investigate that further.
What concerns me and others is Government inactivity over more than 300 cases in which parents claim that their children have been injured by one or other of the vaccines. In particular, there seems to be an extraordinarily high incidence of autism among the children concerned and a surprising number of cases of what appears to be Crohn's disease.
Autism has been dismissed as a side effect by Elizabeth Miller of the Public Health Laboratory in a memorandum to health professionals. She argues that it is simply a coincidence because most autism is diagnosed at about 18 to 30 months, which happens to coincide with the time of vaccination. What Dr. Miller does not explain in that rather simple answer is why the vaccinated children develop other symptoms at the same time as becoming autistic. Many of them develop a raging thirst; many acquire bizarre eating habits; sleep patterns are disrupted and children lose their temperature control. A characteristic common to many of the late-onset autism cases is that speech which had been previously acquired is lost. In other words, the children do not simply fail to develop—they lose what they already had.
That all tends to point to an encephalitic event, and even the Government's chief medical officer concedes that there is a possibility that the vaccine causes autism. In a memorandum to directors of public health on 7 February, he states:
It is therefore unlikely that MMR vaccine plays a part in the development of autism in children who do not have significant neurological manifestations after immunisation.

The inference is that he concedes that the MMR vaccine does play a part if there is a significant neurological manifestation.
Crohn's disease and autism are not the only side effects reported in respect of the MMR vaccine. My attention has been brought to 122 cases in which epilepsy developed after vaccination, and numerous other cases of problems with the immune system.
Finally, nothing can be done about the decision to use Down's syndrome children as guinea pigs for live measles vaccinations in 1960. We now know that the vaccines were not innocuous. We need to be rigorous in the design of safety standards. We need an independent investigation into the links between MMR and MR and Crohn's disease and autism in children. Until then, we should consider suspending the multi-dose MMR vaccines in favour of single-dose vaccines. We should also suspend the revaccination programmes because no safety trials have been conducted on them.

The Minister for Public Health (Ms Tessa Jowell): I thank my hon. Friend the Member for Blaenau Gwent (Mr. Smith) for raising this important issue. I pay tribute to his relentless pursuit of information and inquiry.
I was very concerned when I heard about the use of the measles vaccine on children in residential care in the United Kingdom in 1961—the issue that has prompted this debate. I have uncovered as much of the story as possible and will set out the facts available to me. It is important that hon. Members should recall the context and the extent and seriousness of measles at the time.
In the 1950s, measles in the UK had settled into a cycle of large epidemics every other year. The annual notifications ranged from a minimum of 150,000 to a maximum of 700,000 cases, with up to 300 deaths a year. Measles was a killer both in this country and around the world. Against that background of serious disease, work was progressing internationally to produce safe and effective vaccines. During the 1950s, candidate vaccines had been developed and by 1960 many had already undergone clinical trials in the United States. The results of those trials were reviewed and evaluated in the New England Journal of Medicine on 28 July 1960.

Mr. Llew Smith: Does my hon. Friend accept that the trials conducted in the United States involved about 170 to 180 children, the vast majority of whom would have been regarded at that time as mentally sub-normal? I know that that is an awful phrase, but it was the one used at that time.

Ms Jowell: I should be very happy to supply to my hon. Friend all the information available to me on those studies. I should be happy also to supply him, for his information, with the material that has been provided to me for this debate.
Based on encouraging results from the tests, the authors provided suggestions for future study and subsequent use of measles vaccine. Based on their safety and efficacy data, the authors concluded:
At this time it seems appropriate to recommend the extension of clinical trials of attenuated measles vaccine in special groups.
A "special group" means one in which measles causes high levels of serious illness and death.
I have made a point of starting my reply to this debate with information about the 1960 published review, because it predates the first United Kingdom trial of measles vaccine. The authors of the 1961 UK study referred to the 1960 review in their research. The UK study was built on the US work, and based on the recommendation that special high-risk groups be examined.
Some children have long been known to be at higher risk of suffering severe consequences of measles. Those groups include children with conditions such as Down's syndrome, cerebral palsy, cystic fibrosis and malnutrition. Children with Down's syndrome, such as those in the study, have congenital heart disease, which means that they are much more likely than other children to die or suffer serious injury from measles.
Children in residential care are also a high-risk group. Not only do those children often have underlying medical problems, but measles spreads very rapidly in closed communities. It has been estimated that the introduction of measles into residential units was associated with 70 per cent. to 90 per cent. of attack rates in susceptible children. It is worth nothing that, in May 1968, when measles vaccine was eventually offered to all children, the then Chief Medical Officer wrote to all doctors stating that those who should receive vaccine first, despite anticipated shortages of vaccine, should include
susceptible children living in residential establishments aged between 1 and 7.
Prior to the 1961 study, therefore, the researchers were in the following position: first, they knew that an outbreak of measles was coming; secondly, they knew that children with disabilities such has Down's syndrome were at particularly high risk from measles; thirdly, they knew that the US studies had shown the vaccine to be sufficiently safe and effective to recommend that it be given to special high-risk groups; fourthly, they had an opportunity to give the vaccine to such a high-risk group.
More importantly—I believe that this point has not yet been raised in the debate—the researchers then approached the parents of those children. As reported in Hansard on 4 December 1961 at columns 925–26, the children's parents had been asked and gave their consent to the trial in writing. The study went ahead, with immunisation occurring in January and February 1961.
In 1961, the largest recorded measles epidemic in the United Kingdom occurred, in which 764,000 cases were notified. Of those, 152 deaths were reported. Of those deaths, 132 occurred in the first six months of 1961. Of those 132 deaths, 66 deaths—exactly half—were among people with chronic disease or disability. If we examine those 66 deaths more closely, we discover that more than half those people either had Down's syndrome—accounting for 20 deaths—or were classified as having mental retardation or deficiency, accounting for a further 17 deaths. Most of the 66 people had been resident in hospitals or institutions for at least six months before the onset of measles and all but eight of them were aged under 15.
I am sure that my hon. Friend will agree that those figures tragically demonstrate the heavy toll paid by children with Down's syndrome or mental retardation during measles outbreaks before immunisation.

Mr. Smith: The point that I am trying to make is that conclusions reached as a result of tests on Down's syndrome children cannot be applied to the general population. That is my argument and my criticism of the way in which the tests were conducted. I accept that parents signed agreements to the tests—most people would expect them to have signed agreements—but such agreements do not justify the tests.

Ms Jowell: Clearly, there is an issue of consent. The issue would have arisen then, and it arises now. The important factor, however, is that the parents of those children gave consent to testing—on a group of children who, on the information available to me, were at high risk of measles.
In the 1961 UK vaccine study, the authors reported that none of the 56 vaccinated children developed measles and that none of the children suffered serious side-effects. The authors went on to recommend that the number of instances of rash and fever after immunisation in the study might be reduced by work further to weaken the vaccine virus strain used.
I understand my hon. Friend's concern about such studies and I, too, am determined to ensure that clinical trials are conducted to the highest standards of ethical behaviour and ethical practice. On the evidence available, however—because written parental consent was obtained, supporting research had already been conducted, an epidemic was imminent and the group being vaccinated was at high risk from the disease—I do not believe that that research can be equated with the situations that my hon. Friend mentioned in the Republic of Ireland or Australia.
It may be helpful to the House if I explain the process by which vaccine safety is ensured in the United Kingdom and how we continue to monitor vaccines after they are in widespread use. All manufacturers wishing to market vaccines in the United Kingdom have to apply for marketing authorisations. The applications include full data on the manufacturing process and quality control of the vaccines. The applications are reviewed by staff of the Medicines Control Agency, and advice is taken from experts on the Committee on Safety of Medicines and its biologicals sub-committee.
Each vaccine is considered individually, and a marketing authorisation is licensed only if all aspects of its quality, safety and efficacy are satisfactory. Furthermore, vaccines used in the childhood immunisation programme are batch released by the National Institute for Biological Standards and Control, which means that no vaccine is issued in the United Kingdom unless it passes the highest standards for purity.
Once that rigorous process of licensing has been completed, the licensed vaccine is available for use. Measles vaccine was introduced into routine use in the UK in 1968, by which time the UK had observed the experience in the US, where measles vaccine was first licensed and recommended for use in 1963.
Once vaccines are used, all reported adverse reactions to them are carefully monitored by the Committee on Safety of Medicines and the joint committee on


vaccination and immunisation, which advises my Department. I tell my hon. Friend the Member for Blaenau Gwent that I am keen to ensure that all fresh evidence about any possible adverse reactions are submitted to that committee for proper scientific assessment and appraisal.

Mr. Smith: I should like to make three quick points, all of which I am sure that you will answer. Will you tell me, first, what safety trials have been conducted on re-vaccination? Secondly, will you comment on the studies by Dr. Andrew Wakefield of the Royal Free Hospital? Thirdly, do you accept the link between vaccination, measles, MMR and MR and autism and Crohn's disease? If not, can you explain—

Mr. Deputy Speaker (Sir Alan Haselhurst): Order. I remind the hon. Gentleman that he is addressing the Chair.

Ms Jowell: In the time left in this debate, I will endeavour to cover the points raised by hon. Friend. If

time runs out, however, I will write to him to deal with them. I am aware of the concern about an alleged link between measles, autism and Crohn's disease. I understand that evidence submitted to the joint committee on vaccination and immunisation could not establish such a link, and that the absence of such a link has been confirmed by a further study of the evidence by the World Health Organisation. I make it clear to my hon. Friend, however, that, if fresh evidence becomes available, I will insist that further investigation of that evidence is undertaken.
Secondly, I know that Dr. Andrew Wakefield of the Royal Free hospital has conducted research in this area, and I will ensure that proper attention is given to it and its conclusions by my officials. However, I have to make it clear that it is the joint committee on vaccination and immunisation—an independent body—which currently advises the Department on vaccine safety.

Mr. Deputy Speaker: Order. We now come to the next debate.

New Age Travellers (Harborough)

Mr. Edward Garnier: I am grateful for the opportunity to raise the issue of new age travellers in my constituency. I am also grateful to the Under-Secretary of State for the Environment, the hon. Member for Greenwich and Woolwich (Mr. Raynsford), for his attendance to respond to the debate.
Until relatively recently, my constituency was mercifully free of trouble from new age travellers. Two years ago, a small group of them set up camp on farmland in Blaston, but, following the intervention of the landowner through the courts—albeit at considerable expense to himself—they were moved on, and have not been back since. This year, however, things have taken a turn for the worse.
In February and March, an illegal encampment of travellers was set up in Welham lane in the parish of Great Bowden. Welham lane is a public highway that leads from the A6 Market Harborough bypass eastwards towards the village of Welham. It is about three miles from the A6 to Welham along that lane—a single-track road with wide grass verges. There is a hedge down each side of the lane, and beyond the hedges lies typical Welland valley pasture land, which for centuries has been used by local farmers to graze cattle and, more recently, sheep.
At the A6 end of the lane, there is a farmyard to the north and a pheasant hatchery and farmhouse to the south. Halfway along the lane to Welham there is a hump-backed bridge over a stream. When the bypass was completed, the bridge was blocked to road traffic, but it remains open to horses, bicycles and pedestrians. The lane has been used extensively by local residents and farmers for recreational and agricultural purposes for many years.
The land either side of the lane is farmed by tenants and landowning farmers. This spring, as in earlier years, the fields were used for ewes and lambs as well as for the beef cattle for which Harborough is justly famous, but all this changed when the new age travellers arrived.
To begin with, there were only a few who parked their caravans, lorries and old buses on the verges to the west of the mid-way bridge. They were mostly in their twenties and thirties, although there were a few young children. They also had dogs—large dogs which ran up and down the lane, chasing the farmers" pick-up trucks carrying feed to the sheep, or barking at the heels of the horses being ridden down the lane.
At first, the new age travellers were seen as a curiosity by local residents, but, as their numbers grew, their behaviour became worse. By April, there were about 80 people living along the lane. It was by now impossible to take a dog for a walk along the lane without being menaced by the travellers' dogs. Riders would not risk taking their horses down the lane.
At weekends, the travellers held noisy parties, setting up large amplifiers in the fields and blasting music across the countryside to the annoyance of my constituents. One couple who live in a village two or three miles from Welham lane had to stay with relations in Suffolk to be sure of getting some sleep at night.
The encampment became a centre for drug dealing, as dealers from the city of Leicester found a ready market there. The site became a health hazard as the travelers

defecated in the hedgerows, left litter and burned open fires along the verges. The travellers would steal petrol from local garages and demand drinking water from nearby farmers. The farmers themselves were also being abused. The travellers' dogs were allowed to roam free across the neighbouring fields, worrying and killing ewes and lambs. When the farmers came down the lane each morning and evening to feed their beasts, their vehicles were damaged and their access was blocked.
In the end, it became impossible to use the land at all, and flocks had to be moved to other land. That meant that tenant farmers had to pay hundreds, and even thousands, of pounds to rent the grazing that was effectively now out of bounds. For tenants and owners alike, it meant facing the possibility of over-grazing other land, at a time when rain and new grass were scarce. As if all that were not bad enough, the way in which the local authorities and the police dealt with the illegal encampment left much to be desired.
Before I say what I am about to say, let me make it clear that, on an individual basis, the Home Office, the county council and district council officials and the police officers from Market Harborough, whose task it was to deal with the new age travellers, did their best, and genuinely wanted to help. But what I and my constituents found so frustrating was the slowness of the official reaction and the apparent failure to anticipate and then co-ordinate a response to the problem caused by the travellers.
It seems that each agency of government was nibbling at the problems but without reference to any other relevant department, and that no one was taking a strategic overview or producing a co-ordinated response. To illustrate what I mean, I cite the following example: the nuisance caused by the loud music systems was a matter for the district council's environmental health department. The environmental health officer had powers to serve a noise abatement order, but, for understandable reasons, he would not go down Welham lane to serve the order without a police escort.
The police headquarters in Leicester felt that it was not a proper use of precious resources to send a regiment of policemen to protect one environmental health officer in far-off Great Bowden while he served a noise abatement order, when officers could be more fruitfully employed patrolling the streets of the city of Leicester. Nor would the police escort farmers to and from their fields through the encampment twice a day. They could not arrest the drug dealers or drug users unless they had evidence, and none of sufficient quality was available. If the vehicles were unlicensed and uninsured, it was a small matter compared to what needed doing elsewhere.
Action eventually came from the legal department of the county council, the highway authority with responsibility for Welham lane. In my naivety, I thought that the council would take proceedings under section 77 of the Criminal Justice and Public Order Act 1994—one of the provisions of that statute designed specifically to deal with the increasing problem of new age travellers.
I had several discussions with the county council in April this year, and I formed the distinct impression—although it was not put in so many words—that, as a matter of policy, Leicestershire county council and other local authorities do not use the 1994 Act, because it does not achieve its intended purpose. It was suggested to me


that the Act allows for defences to be raised which hinder and delay the implementation of court orders made under it.
Instead of using that Act, the county council had applied to the district judge by originating summons under order 113 of the rules of the Supreme Court—a procedure for recovering possession of land wrongfully occupied by trespassers, which has been in use for 20 years or so and which is designed to deal primarily with urban squatters where not every trespasser can be identified.
The district judge was sympathetic to the county council's application but felt constrained to adjourn the hearing for two weeks, which was extended to three weeks, to allow the respondent new age travellers to gather evidence of hardship, to apply for legal aid and to apply to the divisional court to review the county council's decision to evict them. This was done on the advice of a firm of solicitors which has made something of a name for itself in this aspect of the law.
To my constituents, this meant that the very people who were continuing to do them harm were now being financially assisted by the state—over and above the welfare benefits that they were already receiving—through legal aid to allow them to do further harm. It was a case of the law-abiding, taxpaying citizen subsidising the unlawful, social-welfare-receiving trespasser in the continuance of his anti-social conduct.
The only thing that my farming constituents and I found in the least amusing throughout this episode was the new age travelers' denial that it was their dogs that had killed the sheep. It could not have been their dogs, they told the district judge, because their dogs were vegetarians.
The other illegal encampment in my constituency is in Mill lane in Smeeton Westerby. This village is about eight miles north-west of Market Harborough, and eight miles south-east of the city of Leicester. Mill lane runs north from the village main street towards the parish of Fleckney. The first half mile of the road from the village is a metal road; the remainder is not made up but is still part of the public highway. Like Welham lane, it is hedged and verged, and runs through grazing land. At one point, there is a privately owned wood or orchard adjacent to the lane.
About three or four years ago, a small group of travellers broke into the wood and set up camp there. They did all the things that trespassers usually do, but, as the site was on private land and the owner lives in Australia and has either lost interest in it or cannot be found, the travellers have stayed in the wood. So long as there were not many of them and they kept their dogs under control, nobody did anything much about them. Indeed, they have been there for so long that I believe the Post Office has given them a postal code, and two children from the camp attend the local primary school.
Unfortunately, the site has acted as a magnet for other new age travellers, who have camped along the verge of the lane. The problems experienced by residents and farmers in Great Bowden with the Welham lane site are now being replicated in Smeeton Westerby.
There are now approximately 80 new age travellers living along Mill lane. Their dogs have killed sheep and lambs—two of the dogs have been shot dead by a local farmer to protect his sheep. The new age travellers have begun to attract drug dealers from Leicester, and they have made it impossible for villagers to ride their horses or bicycles along the lane, or even to walk their dogs.
Attempts to remove the new age travellers from Mill lane have been frustrated by two things: first, by the travellers simply moving to the adjacent private land and then, after an interval, returning to reoccupy the verges; and, secondly, by the landowner's absence abroad.
However, following the lessons learned from the Welham lane episode, the police, Leicestershire county council and Harborough district council are working together in a more organised fashion to decide how best to deal with the 50 or so vehicles and their inhabitants on Mill lane. Inspector Steve Hanson, who has recently taken over as officer in charge of the Market Harborough local police unit, has introduced a greater sense of purpose and focus. The chief executives of the two councils and their legal departments are now working closely together.
When the Welham lane site was eventually vacated by the new age travellers after the district judge's order had been finalised in May, the police said that they were prepared to provide back-up in sufficient numbers to let the travellers know that they meant business, and the travellers withdrew their application to the divisional court. A vast amount of public money had been spent dealing with the encampment—not just on police and local authority officers' time, but on lawyers' fees, legal aid, Home Office inquiries by me, and the collective dealing with the public inquiries by the several agencies involved. The Smeeton Westerby travellers are still on site. Proceedings against them are being contemplated by the county and district councils.
We need to reconsider the issue of new age travellers with a greater sense of urgency. It is the Government's duty to persuade local authorities to co-ordinate their approach to the problem more effectively. If one county has information about a convoy or encampment of new age travellers, it should make sure that its neighbours know. Removing travellers from Leicestershire helps the people of my county, but that may mean that the encampment moves on to one of the several adjacent counties, and the legal process has to be gone through again at further public expense.
Why cannot the Home Office or the Department of the Environment set up a unit to monitor the activities of new age travellers and advise local authorities on the best means of solving the problems they cause? The same approach should be taken by the police across the country. Intelligence and previous experiences should be shared for the greater advantage of the law-abiding and tax-paying public.
Within counties, district and county councils should talk to each other, plan together and act in concert with the police. It is also incumbent on local authorities to let Members of Parliament and the Government know if they are unclear about or dissatisfied with a statute and its perceived effects or defects, rather than keeping their misgivings to themselves and failing to use it.
Local authorities and the police are misleading themselves about the Criminal Justice and Public Order Act 1994 and recent case law. Section 61 gives the police a power to direct trespassers to vacate land. That power arises if the police believe
that two or more persons are trespassing on land and are present there with the common purpose of residing there for any period, that reasonable steps have been taken by or on behalf of the occupier to ask them to leave and—

(a) that any of those persons has caused damage to the land or to property on the land or used threatening … behaviour towards the occupier … or
(b) that those persons have between them six or more vehicles on the land".

The police need only have reasonable grounds for believing the persons concerned to be trespassers. The trespass does not have to be established by an order of the court before the power under section 61 arises. The period of residence is not specified. I suggest that it can be any period.
The section requires only that the owner should have taken reasonable steps to ask the trespassers to leave. When passing the Bill into law, Parliament did not say that the occupier should be expected to have taken legal action or obtained a court order before the power in section 61 may be invoked. We do not ask those who are assaulted to take civil action before the police become involved to press criminal charges. The power under the section arises if there are at least six vehicles on the land, even if none of the events that I have just recited has occurred.
The statutory purpose of section 61 is clear. When we passed the Act, we wished the police to have the power to direct that land be vacated if at least six vehicles are present, even if no criminal activity or damage to land is involved, without expecting the landowner to use a civil remedy before acting. The importance of that parliamentary intention is emphasised by the reduction in the number of vehicles that must be present, from 12 under the Public Order Act 1986 to six.
Section 77 enables a local authority to serve a direction requiring persons to vacate land, the failure to comply with which may also constitute a criminal offence. However, there are some important differences between section 77 and section 61. The power in section 77 arises if persons are residing in only one vehicle on land in an authority's area. The requirement of at least six vehicles does not apply. It applies if vehicles are located on highway land, unoccupied land or occupied land without the consent of the occupier.
Even for an occupation of fewer than six vehicles, there is no requirement that any of the criminal conduct referred to in section 61 should have occurred for section 77 to apply. An offence is committed under section 77 when a person knowing of the direction fails to leave the land as soon as practicable.
Any defence is restricted to a failure to comply caused by
illness, mechanical breakdown or other immediate emergency.
The defence under section 61, by contrast, includes
a reasonable excuse for failing to leave the land as soon as reasonably practicable".

If a direction under section 77 is contravened, the local authority may apply to the magistrates court for an order requiring the removal of any vehicle, property or resident person. The order may also authorise the authority to remove vehicles or property. Under section 61, the police have a power to arrest, and under section 62 they have the power to seize and remove vehicles without the need for a warrant or order of the court.
I hope that I have shown that sections 61 and 77 are different. If they were not, one of them would be unnecessary. Section 61 is directed at situations in which trespassers remain present on land despite the occupier's request that they should leave and certain misconduct has occurred. That power is available to the police if any of the events set out in section 61(1)(a) have occurred. The police can take direct action against the persons thought to be wrongfully present and their property. The section is clearly intended by Parliament to be a speedy and effective remedy, without the need for additional legal proceedings before the trespass is brought to an end.
In contrast, section 77 deals with a broader range of circumstances, in which criminal activities or substantial numbers of vehicles need not be involved and the interests of private landowners need not be affected. Although the local authority is unable to take direct action without court proceedings, the defence under section 77(5) is relatively limited.
Local authorities and police forces have placed reliance on the case of R. v. Lincolnshire county council and Wealden district council ex parte Atkinson, which was decided by Mr. Justice Sedley in 1996. They have also been influenced by the Department of the Environment circular 18/94.
That case and that circular gave some police forces the false impression that the same principles enunciated by the judge in the Wealden case apply to orders issued by the police or local authorities under the 1994 Act. Some police forces think that inquiries about education, housing, social service needs and similar matters have to be made before a local authority direction can be made, and that, before the police can invoke their powers under the Act, account should be taken of the personal circumstances of the travellers.
The judge in the Wealden case did not analyse section 61 of the 1994 Act in detail. His decision was based as much on the statutory duties placed on local authorities under the Children Act 1989 and the Housing Act 1985, as well as the obligation on local education authorities to provide education for all children of school age in their area.
The Wealden judgment does not support the view that a local authority or chief constable owes a duty of care to trespassers who are the subject of action under section 61. The function of the police is to enforce the law. It is not their primary duty to take a view on social welfare. There is no legal basis for asserting that the police are under a legal duty to take social factors into account before acting under section 61. The annexe to the Home Office circular 45/94 does not suggest that the Wealden case is relevant, or that any such duty applies.
The powers provided to the police under section 61 and to local authorities under section 77 of the 1994 Act to deal with new age travellers are clear. Parliament deliberately provided those powers, and my constituents and I have a right to expect that they will be exercised by public agencies and authorities when necessary.
As a lawyer, I am the first to admit that the law is not always certain, but it can be made more certain if the Government take the steps that I am advocating: the organisation of greater co-operation across the country in dealing with new age travellers on the one hand, and on the other hand instilling a firmer sense of purpose among police forces and local authorities in applying the powers and remedies deliberately given to them by Parliament under the 1994 Act.
Local government officers and police officers are human—so, too, are lawyers—and they naturally have a well-intentioned concern for the welfare of travellers with whom they are required to deal, but I suggest that such well-intentioned concerns should not be placed above the rights of the law-abiding and tax-paying citizens, whose lives and businesses in my constituency—and no doubt many others as well—have been so badly affected by the unlawful activities of new age travellers.

The Parliamentary Under-Secretary of State for the Environment, Transport and the Regions (Mr. Nick Raynsford): I congratulate the hon. and learned Member for Harborough (Mr. Garnier) on securing this debate on an issue of concern in his constituency: the unauthorised camping by so-called new age travellers on land which they do not own, and the appalling nuisance that has been caused, particularly in relation to their dogs roaming on adjacent land, noise from rave parties and intimidation of people living in the area. The hon. and learned Gentleman and his constituents have my sincere sympathy for the obvious distress that the travellers have caused.
As the hon. and learned Gentleman has made clear, this is a complex and emotive area, which can have a real impact on local businesses and communities. It inevitably covers a range of issues: unauthorised camping, noise nuisance, threatening behaviour, dogs, and many others—the list is very long. He has drawn particular attention to how the issue involves working with a number of different authorities and different powers. The spread of responsibility inevitably crosses administrative boundaries not only locally but in central Government. Indeed, I think that he was a little surprised that I was the Minister responding to the debate.
As the hon. and learned Gentleman will be aware, although my Department has policy responsibility for local authority powers under the Criminal Justice and Public Order Act 1994, my right hon. Friend the Home Secretary has responsibility for those powers available to the police, which deal not only with trespass on land but with drug dealing and general criminal activity—whether among travellers or anyone else. There are also important links between our Departments in policy on dogs and dealing with noise nuisance and raves.
The hon. and learned Gentleman has identified the frustrations which can arise when the agencies involved do not, for whatever reason, work well together. It is precisely because the issues are so complex that my officials and their colleagues in the Home Office keep in constant touch on such matters, and have indeed discussed this very case over the past few days.
My officials have also been in touch with officers at Leicestershire county council, who I understand have evicted the travellers camped at Welham lane using civil powers, to regain possession of the council's land, despite

attempts to challenge it through the courts. That proves that such situations can be dealt with effectively, and that unauthorised campers, particularly those who make life a misery for everyone else, can be evicted. One point about the case, however, is the time that the process can sometimes take, which has obviously caused considerable irritation locally.
I am very conscious of the real difficulties that encampments such as the ones described by the hon. and learned Member can present to local authorities, particularly when the travellers involved seek to use every ruse to prolong their stay on a totally unsuitable site. Nobody pretends that it is easy, especially when such large groups are involved, to strike a balance between the need to control what can be—and clearly was in this case—an appalling public nuisance and the rights of the campers concerned, but local authorities which have a consistent, workable policy in place and have good working relationships with the local police and other agencies are more likely to be able to evict successfully when the need arises.
It is precisely such a co-operative attitude—all agencies working together and being clear about one another's responsibilities—that we want to encourage. My Department is examining the scope for disseminating the good practice already in place in some authorities for dealing with unauthorised camping—whether by new age travellers, gipsies or others. We have appointed research contractors from the university of Birmingham to carry out the work. They have just completed phase I of their project, which comprised detailed case studies in six local authority areas where unauthorised camping is known to be a problem, concentrating on the methods employed by those authorities to deal with it.
The researchers have interviewed officers, covering a range of issues such as those pertaining to environmental health, social services, education and enforcement. I look forward to seeing the outcome of their research so far, which will form a vital part of our collective ministerial education on matters concerning gipsies and other travellers. I can already tell from my postbag that the issue excites much public interest across the country. I am, however, bound to say that I get the strong impression that there is no one easy solution to the problem. If there were, someone would presumably have found it by now.
I turn to some of the specific points that the hon. and learned Gentleman raised—first, drug misuse. He says that the Welham lane site became a centre for drug dealing in the Leicester area. I should say straight away that tackling drug misuse, whether by new age travellers or anybody else, is a priority for the Government. He may know that my right hon. Friend the Prime Minister has appointed my right hon. Friend the President of the Council to serve as Chair of a Cabinet Committee to oversee the development of the Government's drug strategy.
Part of the remit of my right hon. Friend the President of the Council will be the appointment of a drugs tsar—someone who will play a major role in ensuring that the Government's strategy for dealing with the problem is effective as it can be. He or she will have the power to gather together key people from health, the police, education, prisons, the probation and other services to ensure that they work closely together. Much good work


is already being done, including that led by the drug action teams across the country at local level. I understand that there is such a team in the Leicestershire area.
More generally, police officers have the power to search persons for possession of drugs under the Misuse of Drugs Act 1971. Section 23 of that Act provides that a constable may stop and search any person—or search any premises—for the purposes of finding controlled drugs. The search must be carried out in accordance with a code of practice issued under the Police and Criminal Evidence Act 1984, and an officer must have reasonable grounds to suspect that the items are being carried before undertaking a search.
The hon. and learned Gentleman painted a worrying and disturbing picture of the travellers' dogs killing a number of sheep on land adjacent to the camp. The excuse offered by travellers that their dogs could not have killed sheep "because they were vegetarian" is one of the richest that I have ever heard.
The hon. and learned Gentleman may be aware that provisions of the Environmental Protection Act 1990 make it an offence for an owner or person in charge of a dog to permit it to be in a public place not wearing a collar with the name and address of the owner on the collar or on a plate or badge attached to it. The Act also allows for the seizure of dogs on private land, provided that the landowner or occupier has given his consent. The Control of Dogs Order 1992 lists certain types of dogs as exemptions, but dogs belonging to gipsies and travellers are not included.
I turn to the powers available to the police under section 61 of the 1994 Act, which I know is of particular concern to the hon. and learned Gentleman. Such matters are properly for my right hon. Friend the Home Secretary to consider, but I can say that his general position is that he will not comment on specific police operations since they are the responsibility of the chief constable.
It is for the chief constable to decide how to use the resources at his disposal and how to order his policing. It is also important to remember that the power is discretionary, and that only in circumstances where there is a serious threat to public order or of criminal activity will the police consider using the power. I know that the hon. and learned Gentleman has already been in touch with the Leicestershire constabulary on the matter.
The hon. and learned Gentleman has given a reasonable description of the section 61 powers, and he was right to say that the Wealden case did not concern the use of the power. He will, I am sure, know that it is not for me or

any ministerial colleague to give a definitive interpretation of the law. That, rightly, is for the agencies involved and ultimately for the courts.
It seems only common sense that the police and local authorities should liaise with one another in such cases, so that, if the police decide to use their public order powers, the relevant local authorities can take steps to fulfil any statutory responsibilities that they may have towards the trespassers. The police will also wish to take into account welfare factors in using their powers, and responsibility for judging how to do that rests with the chief constable.
As for setting up a unit to monitor new age traveller activity, I understand that a body called the northern intelligence unit, which is hosted by Cumbria police, and a sister unit, which is hosted by Wiltshire police, collect data from all forces about the movements of new age travellers and ravers in England and Wales. Intelligence is provided to police forces as appropriate, and I would expect forces to liaise with local authorities on the basis of such intelligence where that is appropriate. We have, however, to remember that there may be some sensitivity surrounding the use of intelligence obtained by the police for agencies outside the police service.
The police also have powers under the 1994 Act to deal with unlicensed mass night-time raves on land, which, as at Welham lane, cause an unacceptable public nuisance and affect many people, who are kept awake, sometimes for nights on end, by incessant music played at intolerable levels. I know that the hon. and 1 Gentleman will agree with me that local communities should not have to fear the prospect of mass invasions of land by those who selfishly seek entertainment regardless of the rights and amenities of others. The police are, for example, able to stop persons who they believe will attempt to go to a rave site within a radius of five miles of the site and direct them not to proceed. It is an offence not to obey that direction.
Once again, I thank the hon. and 1 Gentleman for bringing this important arid difficult subject to the attention of the House. He has highlighted a number of points which ministerial colleagues and I will want to bear well in mind as we consider the range of issues involved. He has also highlighted all too well the difficulties which can arise when agencies responsible for eviction try rightly to balance the need to restore public order with the rights of the campers concerned. Nobody pretends that that is, or ever has been, an easy balance to strike—

It being Two o'clock, the motion for the Adjournment of the House lapsed, without Question put.

Sitting suspended, pursuant to Standing Order No. 10 (Wednesday sittings), till half-past Two o'clock.

Oral Answers to Questions — WALES

Devolution

Mr. Tyrie: To ask the Secretary of State for Wales what representations he has received from Blaenau Gwent relating to the referendum on devolution in Wales. [6995]

The Secretary of State for Wales (Mr. Ron Davies): I have received two such representations.

Mr. Tyrie: The hon. Member for Blaenau Gwent (Mr. Smith) has alleged, on several occasions, that he was threatened with expulsion from the Labour party if he continued his opposition to a Welsh Assembly. Does the Secretary of State regret having made those threats?

Mr. Davies: I did not make any such threats, and neither of the representations that I received from Blaenau Gwent concerned my hon. Friend the Member for Blaenau Gwent (Mr. Smith). If the hon. Gentleman had witnessed an incident last night, when I saved my hon. Friend from being run over by a ministerial car, he would realise just what a close and loving relationship we have.

Mr. Touhig: Does my right hon. Friend agree that the people of Blaenau Gwent and the whole of Gwent would benefit if the result of the referendum were in favour of an assembly? We would have a democratically elected assembly to run services in Wales such as education, instead of unelected quangos, such as the body that runs the Gwent tertiary college. It has increased staff costs by £4.5 million in two years while student numbers have been static, has made 40 people redundant and is now cutting courses.

Mr. Davies: My hon. Friend is right. I am aware of the problems of the Gwent tertiary college, which are of great concern to the community, the students, the staff and the management of the college. I know that my hon. Friend and others from Gwent have made representations to my hon. Friend the Under-Secretary who is dealing with the matter. I agree with the thrust of my hon. Friend's question—if we had a democratic settlement in Wales and if the quangos were subject to democratic accountability, the situation would not arise.

Mr. Ancram: The Secretary of State really cannot take refuge behind humour on what is a serious matter. Will he take this opportunity to deny categorically that he ever threatened the hon. Member for Blaenau Gwent (Mr. Smith) with expulsion from the Labour party or brought undue pressure to bear on him, either directly or vicariously through advisers, if he did not toe the party line on devolution? If the Secretary of State denies that, is he accusing the hon. Gentleman of not telling the truth?

Mr. Davies: I have already answered that question by reference to an incident that occurred last night. The right hon. Gentleman should not assume that the generosity of spirit that I showed last night would necessarily apply were Ito see him in the same circumstances.

Mr. John Smith: Will my right hon. Friend take every opportunity, when he receives representations, to point out

that a Welsh Assembly will give a bigger boost to the Welsh economy than it has seen in the past 20 years—indeed, since the creation of the Welsh Development Agency by the last Labour Government?

Mr. Davies: My hon. Friend had a distinguished career in furthering the economic development of Gwent before he re-entered the House. All of us recognise the great work that he has done. He paid tribute to the Welsh Development Agency. I am pleased to say that we will announce next week a positive programme to modernise the WDA by creating a new economic powerhouse. The name of the Welsh Development Agency is of worldwide renown. When it has the support of a democratically elected assembly, it will continue to improve our economic prospects in Wales.

Mr. St. Aubyn: To ask the Secretary of State for Wales what plans he has for campaigning with his parliamentary colleagues during the referendum on devolution for Wales. [6996]

Mr. Whittingdale: To ask the Secretary of State for Wales what will be his role in the referendum campaign. [6997]

Mr. Ron Davies: I shall play a vigorous part in securing a yes vote, along with my right hon. Friend the Prime Minister, other Cabinet colleagues and hon. Members representing constituencies all over the United Kingdom in the referendum to be held later this year. The Government are launching a crusade to create a modern constitution for the entire United Kingdom, and a Welsh Assembly is a vital part of that.

Mr. St. Aubyn: Will the Secretary of State and his colleagues in the campaign promise that the new Welsh Assembly will decide such matters as the legal age at which people can buy cigarettes in Wales? Will the new Welsh Assembly be able to decide such matters as how foxes are controlled in Wales? If the right hon. Gentleman will not promise to let the Welsh Assembly decide such matters, is that not because he trusts the choice of the people of Wales in such matters as little as he trusts the people of Blaenau Gwent in their choice of their Member of Parliament?

Mr. Davies: The hon. Gentleman is new to the House, and I welcome him to Welsh Question Time. Clearly, he has not yet had the opportunity to learn the difference between primary and secondary legislation. We are not proposing to give to the Welsh Assembly discretion to pass laws on the matters that he cites. The assembly will, however, have responsibility for determining a block allocation of finance, which is currently running at a record level of more than £7 billion a year. It will have a range of responsibilities for secondary legislation. It will be able to deal with many of the administrative matters that I currently deal with as Secretary of State for Wales. More important, it will bring an end to the quango years during which our democratic government in Wales has been corrupted by previous Conservative Governments.

Mr. Whittingdale: Does the right hon. Gentleman believe, as is now apparent, that the Prime Minister and the Deputy Prime Minister are to front the referendum


campaign as a direct response to the embarrassing revelations of the right hon. Gentleman's threats to his own Back Benchers to try to silence opposition?

Mr. Davies: No, I do not recognise any truth in that. The real question that must be asked is, where is the no campaign? [HON. MEMBERS: "Behind you."] The Labour party will run a whole-hearted and vigorous campaign to secure the support of the people of Wales in the referendum. It appears that the Conservative party is frightened to mount its own campaign and has decided to hide behind the millions of pounds being put up front by a tax exile from Jersey.

Mr. Llew Smith: Whether we are for or against a Welsh Assembly, does not the Secretary of State regard it as wrong that massive amounts of taxpayers' money will be spent pushing the yes vote, but not one penny of taxpayers' money will be spent to assist those trying to put an alternative view?

Mr. Davies: If that were the case, I would indeed be worried, but let me assure the hon. Gentleman and every Member—[Interruption.] Let me assure the whole House that there is no question of one penny of taxpayers' money being spent to assist the yes campaign. The Government will put their proposals before the people in a referendum. We have a responsibility to explain to the people of Wales the details of our proposals. We will do that. It will, however, be a matter then for the political parties to seek to persuade people either to support or to oppose those proposals.

Mr. Donald Anderson: When my right hon. Friend enters the referendum debate, will he, in his usual gentle way, point out that the people of Wales do indeed have a choice? They can choose either movement and constitutional change, or the status quo—a status quo that suits Conservatives, who can never win power in Wales through the ballot box, but have to rely on stuffing the quangos with their friends and relations and bypassing the normal processes of democracy.

Mr. Davies: I agree with my hon. Friend, and it is a great surprise to me to note the arrogance of the Conservative party. Conservatives have just come through a bruising general election in which they lost every seat in Scotland and Wales because they wanted to defend the over-centralised status quo. If they continue as they are, they will manage to create in England precisely what they recently achieved in Scotland and Wales—a Tory-free zone.

Mr. Dafis: Would the Secretary of State be interested to know that I was in Cardiff this morning, collecting names for Plaid Cymru's petition on parity with Scotland, and that the vast majority of people approached enthusiastically signed up to that principle, as well as to the principle of establishing a democratically elected body for the whole of Wales?

Mr. Davies: I am pleased to note the hon. Gentleman's second comment—that the people in Cardiff enthusiastically supported the creation of a democratically elected assembly. His earlier question, however, was a little late, because we have finalised the proposals in the

White Paper. They are now at the printers and will shortly be made public, so I am afraid that it is a little too late to accept the sort of amendment that he suggests.

Mr. Gareth Thomas: In view of the report in today's edition of The Times that my right hon. Friend usually takes his holiday in Wales, does he agree that the quality of debate, especially at Welsh Question Time, would be substantially improved if Conservative Members, none of whom represents a Welsh constituency, followed his example and learned something about Wales, especially about the huge demand for a renewal of democracy there?

Mr. Davies: I certainly know that my hon. Friend will attend the National Eisteddfod at Bala in August, and I look forward to joining him there and spreading the message for a yes vote. I also note that he has been enthusiastically campaigning in north Wales, and I am delighted to assure him that when the White Paper is published next week he will see that we have many positive proposals to ensure that the interests of north Wales are properly represented, and that the assembly we create will be a truly inclusive one, representing all interests in Wales.

Mr. Evans: The Secretary of State cannot take all the credit for the fiasco that best sums up his first few weeks in office. As he gently roams the hills and valleys of Wales, trying gently to persuade the Welsh people about the merits of his argument on devolution, he will have to answer some serious allegations relating to his special adviser.
What advice did the right hon. Gentleman give his special adviser after the embarrassing revelations about the advice that that person gave to Blaenau Gwent council? What role will that special adviser play during the referendum campaign? Will he accompany the Secretary of State on his tour of Wales, or will he be confined to barracks with strict instructions not to use the telephone to issue any advice on behalf of the Secretary of State, especially to local authorities in Wales?

Mr. Davies: The hon. Gentleman is new to the Front Bench, and it falls to me to congratulate him on his appointment—but I must say that when we refer to the valleys of Wales, we do not always think of Ribble Valley as one of them.

Mr. Evans: Answer the question.

Mr. Davies: I shall answer the question. One of the reasons why I support a new democratic arrangement for Wales is because of the way in which over the years the hon. Gentleman's party systematically corrupted public life in Wales. Last weekend, Viscount St. Davids, a former Welsh Office spokesman in the Lords, confessed to having plotted with David Hunt, a former Conservative Secretary of State for Wales, to ensure political bias in Welsh quangos. I should have thought that the hon. Member for Ribble Valley (Mr. Evans), in his first


appearance at the Dispatch Box, would take the opportunity to apologise for the previous misdeeds of his party.

Mr. Caton: To ask the Secretary of State for Wales when he expects to publish the White Paper on the Welsh Assembly; and if he will make a statement. [6998]

The Parliamentary Under-Secretary of State for Wales (Mr. Win Griffiths): The White Paper will be published on 22 July.

Mr. Caton: I thank my hon. Friend for that reply. Clearly, it is time to shift the focus from the democratic rights of individual Welsh Members of Parliament to the democratic right of all the people of Wales to hold their Government accountable. Does my hon. Friend agree that the challenge for the Conservative party and any allies that it may have in Wales is how they can justify supporting devolved power, in the form of the Welsh Office, while denying the democratisation of that power through a Welsh Assembly? Is not that the key democratic question at the centre of the debate?

Mr. Griffiths: It is indeed, and we know why the Conservative party does not want a Welsh Assembly: through the appointments that it has made over the years, it has taken powers from local government—creating Tai Cymru, for example—and by and large packed the quangos with its own supporters, who have often been defeated in elections in Wales. The sooner we get back to a democratic Wales, in which the people have a real voice in its government, the sooner we can be assured of even better government in Wales.

Mr. Livsey: Can the Minister confirm that, when the White Paper is published, the interests of mid-Wales will be looked after by the continuation of the Development Board for Rural Wales? There is great concern about structural funds being renewed and, in the agriculture industry, about green pound devaluations. Can he give us an assurance?

Mr. Griffiths: I can assure the hon. Gentleman that the concerns and needs of mid-Wales will be fully catered for in the new economic powerhouse that we will create. We want the Welsh Assembly to be fully inclusive and to ensure that mid-Wales benefits, like all of Wales, from the new arrangements.

Mr. Rowlands: Can my hon. Friend also assure us that the White Paper will foreshadow legislation that will abolish the unappointed quango boards and not, as has been suggested, merely make them accountable to a Welsh Assembly? Our rhetoric must be matched by our legislative action.

Mr. Griffiths: Without wishing to prejudge what the White Paper will say, I can tell my hon. Friend that some quangos will disappear immediately and others will be democratised, after which the Welsh Assembly will have a choice to make about the best way of proceeding with democracy and the organisation of quangos in Wales.

Mr. William Ross: Given the earlier assurance that the Government would welcome an input from all parts of

the United Kingdom on the question of devolution for Wales, can the Minister give us a precise assurance that, in preparing the White Paper, the Government have taken fully into account the experience of devolved government in Northern Ireland, from which it is apparent that only when a Unionist party has a say can the Union of the whole Kingdom be maintained? Will the policy of Labour members elected to a new devolved body be to maintain and secure the Union?

Mr. Griffiths: I assure the hon. Gentleman that the Union will be maintained, by consent, and that in the preparation of our White Paper we considered not only what has happened in the United Kingdom but what has happened in Europe and many other parts of the world.

Mr. Ancram: I thank the Minister for at least trying to answer the questions: a great improvement on the Secretary of State, who has not answered a single question that the Opposition have asked him. Can he confirm the report in yesterday's Financial Times that, far from getting rid of quangos, the intention in the White Paper is to merge the highly successful Welsh Development Agency and others into what can only be termed, in the Secretary of State's words, an over-centralised super-quango? How does that square with him and his colleagues calling themselves the slayers of quangos?

Mr. Griffiths: The right hon. Gentleman will have to wait for our White Paper on 22 July to see specifically what is proposed across the range of quangos in Wales. I am quite sure that he will then have plenty of opportunity to make whatever response he likes.

Mr. Alan W. Williams: When the White Paper is published, will it describe a system of proportional representation for elections to the Welsh Assembly, which will involve additional members, based on the Euro constituencies? It appears that the Government will conform to proportional representation for the European elections nationally in 1999, or certainly by 2004. Those elections will be based on the regional list system. Does that mean that our Euro-constituency basis for the additional members has to be rethought?

Mr. Griffiths: To respond to my hon. Friend, I would have to move into Departments over which the Welsh Office has no control. I reassure him that no decisions have been taken about what will happen at the next round of European elections. We need to take each bridge as it comes, and I do not propose to cross that one at the moment.

Regional Air Network

Mr. Öpik: To ask the Secretary of State for Wales if he will make a statement on the promotion of a regional air network for Wales. [6999]

The Parliamentary Under-Secretary of State for Wales (Mr. Peter Hain): The development of air services is primarily a commercial matter for airline operators. I will, however, be considering the role of air services, along with all other transport modes, in the context of the development of an integrated transport policy for Wales.

Mr. Öpik: I thank the Minister for that answer. As Welshpool airport has a serious chance of expanding to become the mid-Wales airport, will he commit to giving that initiative serious consideration as we make progress with it?

Mr. Hain: The hon. Gentleman's constituents will thank him for raising that matter because the improvement of air services to mid Wales is obviously important. I will do everything that I can to assist. In the case of Welshpool airport, discussions are taking place between the landowner and the airport owner. I hope that they can come to an agreement from which we can all move forward.

Devolution

Mr. Green: To ask the Secretary of State for Wales what representations he has received concerning the no campaign in the referendum on an assembly in Wales. [7000]

Mr. Ron Davies: I have received several such representations.

Mr. Green: Since the Secretary of State has failed twice to answer this question, I thought that I would give him another opportunity. Can he say whether he uttered the threat of expulsion from the parliamentary Labour party to the hon. Member for Blaenau Gwent (Mr. Smith)? If he says as he has before that he never uttered it, can he explain why the hon. Gentleman insists that he did?

Mr. Davies: I have answered that question several times.

Mr. Barry Jones: Does my right hon. Friend recollect the meeting in Flintshire, north Wales, on 7 July, which he addressed and which was so crowded that many people had to stand throughout the duration of the meeting? Surely there will be a yes vote victory. How will he ensure a large turnout for the referendum, and how will he seek to bring the governance of Wales closer to the people?

Mr. Davies: I should say at this stage that I was grateful for my hon. Friend's support at that meeting in Mold, which was very well attended. We will be producing a White Paper next week. We will be ensuring that a popular version of that White Paper is distributed to every household in Wales. As I said, it will then be a matter for the political parties in Wales to persuade people to vote in the referendum.
It is certainly my intention, along with that of my colleagues in the Cabinet, the Prime Minister, the Deputy Prime Minister and many Members of Parliament from all political parties in the House, to campaign as vigorously as I can in the summer and in the run-up to the referendum. When the people of Wales are given the opportunity to create a real voice for themselves and a democratic framework to improve our economic performance and the quality of our public services, they will turn out in large numbers and give a positive yes vote.

Mr. Forth: In regard to an assembly in Wales, what proposals do the Government have for consulting the people of England, who will probably end up paying for most of it anyway?

Mr. Davies: This is Welsh Question Time. The Welsh Office has no proposals to consult the people of England.

Mr. Wigley: Will the Secretary of State tell the House how many constructive representations he has received from the no campaign for improving government in Wales, or is its campaign entirely based on retaining the status quo, quangos and all? Is it not true that the general election result in Wales showed overwhelmingly that, whatever our other differences, the overwhelming majority of the people of Wales rejected the status quo as totally unacceptable?

Mr. Davies: All 40 Welsh Members were elected on the basis of manifestos that were committed to changing the discredited status quo. I understand that the no campaign is being fronted by a tax exile from Jersey. It is supported by the Conservative party and it has a large measure of support from hereditary peers in another place. I am not sure which is the least attractive.

Mr. Hanson: Does my right hon. Friend agree that the climax of the no campaign was reached on 1 May, when the only party arguing against the Welsh Assembly secured no seats in Wales?

Mr. Davies: That was not quite the climax, as I understand the meaning of the word. I hope that we shall have a rather more exciting occasion in the middle of September, when we celebrate a yes vote.

Proportional Representation

Mr. Gibb: To ask the Secretary of State for Wales what representations he has received concerning the use of proportional representation in the elections for an assembly in Wales. [7001]

Mr. Ron Davies: I have received several such representations.

Mr. Gibb: Does the right hon. Gentleman agree that any use of PR using a list system would give tremendous power to the Labour party machine? The right hon. Gentleman talks glibly about transferring power from Westminster to the people of Wales, but he would be transferring power from the people of Wales to himself and his Labour colleagues who are in charge of the Labour party list.

Mr. Davies: No. I reject that entirely. The hon. Gentleman is new to Welsh Question Time, and I welcome him. It is clear, however, that he does not understand the system of PR that is the Labour party's policy. The Labour party will not benefit from these proposals. The Conservative party, which has 20 per cent. of the vote in Wales but no parliamentary representation, would benefit. Plaid Cymru and the Liberal Democrats would be the main beneficiaries.

Devolution

Mr. Fabricant: To ask the Secretary of State for Wales what representations he has received on the conduct of the devolution referendum campaign in Wales. [7002]

Mr. Hain: Several.

Mr. Fabricant: Does the Minister recall the report in the Western Mail four and a half years ago of the attempt by the present Secretary of State for Wales to duff me up in the Corridor outside the Chamber for daring to table a question for Welsh Question Time? Does he agree that he was wrong then? Does he agree also that it is wrong now for him to employ similar bully-boy tactics against the hon. Member for Blaenau Gwent (Mr. Smith)?

Mr. Hain: I hope that the hon. Gentleman did not lose his hair in the incident. I know that the hon. Gentleman is trying hard, as are his colleagues, to divert the debate from the main issue that will face the people of Wales in September, when they will be invited to give a resounding yes vote to establishing a real voice for Wales and thereby rejecting the bankrupt, quango-ridden, corrupt politics that the Tories visited upon Wales for 18 years. Is it not time that the Tories came out clearly and honestly and mounted their no campaign? When they do, they will be given a thrashing by the people of Wales, just as on 1 May.

Mr. Flynn: Does my hon. Friend recall that only a week ago, not four years ago, there was a splendid and crowded meeting in Newport, during which representatives of Blaenau Gwent and other areas in the county expressed their overwhelming support for the yes campaign? Did they not say with one voice that they want decisions on health and education in Wales to be taken in Wales, not in London?

Mr. Hain: My hon. Friend is right. There was a massive meeting—there was standing room only—in Newport last Friday. Such meetings are taking place throughout Wales. People want to get out and campaign for the yes vote in September because they want a real voice for Wales. They want decisions on jobs, schools, hospitals and on all the other issues that are now taken by the Welsh Office to be made in a much more democratic way. They want a new democratic constitution for Britain and a new democracy for Wales.

Mr. Hogg: Can the Minister explain why, on tax-raising powers, a distinction is being made between proposals for the Scottish Parliament and those for the Welsh Assembly? Why are the people of Wales being denied tax-raising powers? In the referendum, will the Minister ask the people of Wales whether they would like tax-raising powers to be given to the Welsh Assembly?

Mr. Hain: I congratulate the right hon. and learned Gentleman on asking a different question from those of his colleagues. [HON. MEMBERS: "Answer."] Will hon. Members wait just a minute—or a second, even? The answer is quite clear. Scotland has its own legal system and therefore requires a different form of devolution from that appropriate for Wales.

Health Targets

Mr. Rhodri Morgan: To ask the Secretary of State for Wales what targets he has set for improvements in the health of the Welsh population. [7003]

Mr. Win Griffiths: The Welsh Office issued advice to the NHS in Wales on 11 June this year on a number of targets to improve the health of people in Wales and to improve the responsiveness of health services.

Mr. Morgan: I thank my hon. Friend for that reply. Does he agree that one of the most tragic legacies of the previous Government's failure in public health matters in Wales was their failure to set any achievable targets in life style-related public health issues, such as diet, exercise, obesity and, above all, the teenage take-up of smoking? Does he further agree that the sooner the present Government get around to implementing the proposed ban on tobacco advertising, the better for everybody, including young people in Wales?

Mr. Griffiths: My hon. Friend will be pleased to know that I was able to attend the anti-smoking summit earlier this week, which was very successful. I can assure him that legislation will be introduced after consultation to effect the ban on tobacco advertising.

Oral Answers to Questions — PRIME MINISTER

Engagements

Dr. Marek: To ask the Prime Minister if he will list his official engagements for Wednesday 16 July. [7025]

The Prime Minister (Mr. Tony Blair): This morning, I had meetings with ministerial colleagues and others. Later today, I will continue to have such meetings.

Dr. Marek: Is the Prime Minister aware that there is a growing consensus in Gibraltar that the constitution should be changed so that Gibraltar becomes a little less of a colony and a little more of a Crown dependency? Should proposals be placed before him that do not affect the treaty of Utrecht in any way, will he give them his careful and serious consideration?

The Prime Minister: What I can say is that my right hon. Friend the Foreign Secretary said to the Chief Minister of Gibraltar, on 7 July, that any proposals made by the Gibraltar Government would, of course, be given careful consideration. They must be compatible with the treaty of Utrecht. I can certainly say to my hon. Friend that we will never consent to any arrangement that goes against the freely expressed wishes of the people of Gibraltar.

Mr. Hague: I welcome the further fall in unemployment announced this morning. What lessons does the Prime Minister draw from the fact that unemployment has now been falling in Britain for four and a half years, but rising elsewhere in Europe?

The Prime Minister: The lesson I learn is that it was the Conservative Government who put it up in the first place.

Mr. Hague: Would the Prime Minister not be more convincing if he admitted that the huge reductions in


unemployment in this country, while it has risen elsewhere, have a great deal to do with the policies of the previous Government? Is he not aware that we have had in recent years the best record of job creation of anywhere in Europe? But, specifically, does the Prime Minister agree that measures that increase the costs of employing people would tend to reduce the number of jobs available?

The Prime Minister: I see no incompatibility at all between measures that are fair treatment for people at work and a successful economy. In case the right hon. Gentleman had not noticed, he is now in opposition.

Mr. Hague: In case the Prime Minister had not noticed, he is now in government and he has to answer the question.
Does the Prime Minister agree that increasing the costs of employing people reduces the number of jobs available? Since the Prime Minister believes—he must believe, since the Government's welfare-to-work scheme is subsidising employment—that reducing the costs of employment increases the number of jobs available, why does he not believe that increasing the costs of employment reduces the number of jobs available?

The Prime Minister: First, as I told the right hon. Gentleman, the previous Government put up unemployment from the level that they inherited. Secondly, as I told him, I do not believe that treating people fairly at the workplace is inconsistent with decent employment measures. Thirdly, if the right hon. Gentleman wants to improve the unemployment situation, particularly for the young unemployed, whose numbers rose under the Conservative Government, he should support our welfare-to-work programme, not oppose it.

Mr. Hague: The House is entitled to less waffle and more answers to questions. I am not talking about fairness in the workplace; I am talking about the Prime Minister's tax on pension funds, which will cost companies billions of pounds and increase the cost of employing people.
Is it not the truth that all Labour Governments in history have left office with unemployment higher than when they took office? Is it not the truth that loading costs on to businesses through a tax on pension funds, signing up to the social chapter and adopting a minimum wage will put at risk the jobs that have been created for thousands of hard-working people in recent years?

The Prime Minister: What would put people's jobs at risk is a return to Tory boom and bust: a return to the days when, under the Government that the right hon. Gentleman supported, interest rates were higher than 15 per cent.—as they were during the last recession—and borrowing was running at more than £40 billion. [HON. MEMBERS: "Answer the question."] The answer to the question is very simple. The way to secure a strong economy is to take measures to put public finances and monetary policy in order, rather than causing a Tory boom and bust. That is the answer.

Lockerbie

Mr. Dalyell: To ask the Prime Minister what assessment he has made of the statement of 1 July made

by Mr. Abdel Meguid, former Foreign Minister of Egypt, a copy of which has been sent to him, relating to the Organisation of African Unity's policy towards the trial of Libyans indicted for the Lockerbie bombing; and if he will make a statement on Her Majesty's Government's response. [7026]

The Prime Minister: The Secretary-General of the Arab League referred the joint letter from the league and the Organisation of African Unity to the United Nations Security Council. The Governments of the United Kingdom, France and the United States have replied to that letter. I have made a copy available to my hon. Friend, and it is also available to the House.
The Security Council renewed the sanctions on 10 July. It is still our view, as was made clear in the joint letter, that the sanctions should remain in being until the Security Council resolutions have been complied with.

Mr. Dalyell: What did President Mandela say to the Prime Minister last Thursday about Libyan sanctions and Lockerbie?

The Prime Minister: President Mandela did indeed raise the issue of Libya and sanctions. He made the point that the Organisation of African Unity has made. The organisation wants the sanctions to be lifted. Our view, however, is and remains that, if the sanctions are to be lifted, it is important for the Security Council resolutions to be complied with. We believe that that is right, and we reject the case that is made that a fair trial of the Libyan suspects cannot be held in Scotland.

Engagements

Mr. Clappison: Given the answer that the Prime Minister gave my right hon. Friend the Leader of the Opposition, and given that the Prime Minister now has responsibility for employment, is he prepared to say whether he believes—[Interruption.]

Madam Speaker: Order. Some hon. Members seem to think that this is not a proper question, but it is a perfectly proper question.

Mr. Clappison: Is the Prime Minister prepared to say whether he expects unemployment to be lower or higher than it is now at the end of the current Parliament? [7027]

The Prime Minister: I expect that, as a result of the measures that we are taking—particularly the welfare-to-work programme—we will get unemployment down. I have to say to the hon. Gentleman that, if we do not tackle structural, long-term and youth unemployment, the economic costs and burdens that increased so significantly under the last Government will remain. We are not going back to those days.

Mr. Gordon Prentice: Is my right hon. Friend aware that the overwhelming majority of people found guilty of perjury receive immediate custodial sentences? Is it not astonishing that the former Conservative Cabinet Minister, crusader for truth and arms dealer, Jonathan Aitken, should swan off on holiday in California and France? I understand that press reports


today suggest that Jonathan Aitken has now returned to the United Kingdom. Will my right hon. Friend urge the Leader of the Opposition to ensure that Jonathan Aitken stays in this country, faces the music and does not do another runner? [7028]

The Prime Minister: I do not want to comment on any particular cases. Obviously, issues relating to perjury or any other criminal offence are matters for the appropriate authorities.

Mr. Ashdown: The Prime Minister promised that his Government would be about education, education, education. Good words, but how are they honoured by forcing Somerset and Oxfordshire to sack more than 140 teachers?

The Prime Minister: As I said to the right hon. Gentleman last week, we have made the single largest investment in education that any Government have ever made. Before the Budget, he asked for a £500 million programme of school repairs over the Government's lifetime—[Interruption.] No, over the lifetime of the Government: Liberal Democrat Members should read their press releases properly. We gave double that amount, but the right hon. Gentleman now criticises us for not giving enough.

Mr. Ashdown: The Prime Minister knows perfectly well that that money is for next year, not this year, as I pointed out last week. Does he understand that those two councils are not examples of high spending and inefficiency? Oxfordshire has the second lowest spending and Somerset the most cost-effective delivery of education in the country. Is it not true that, whatever the Government provide next year, the real reason for this devastating cut is that they have adopted Conservative education cuts and have decided to spend less on education this year than the Conservatives would have spent?

The Prime Minister: I do not accept that. I am not criticising the activities of the councils to which the right hon. Gentleman has drawn attention, but the Budget has had to be very tight this year because of the huge structural deficit in the public finances that we have inherited. If we do not take action now, we shall be in a serious position in the coming years. We have set aside for next year the largest single increase in investment of any Government. That is a far greater record than that of the previous Administration.

Mr. Ennis: Does the Prime Minister agree that the Government's proposal to disband the current, two-tier GP fundholding system is a giant step forward in the rebuilding of the national health service? Does he also agree that, in future, the treatment that patients receive from the national health service will be based purely and simply on clinical need? [7029]

The Prime Minister: My hon. Friend is absolutely right. I am astonished that the Conservative party has attacked our proposal, because it will ensure that people are treated on the basis of need and not according to who

their doctor is. It is based on two simple ideas—rebuilding the national health service, and fairness—neither of which the Conservative party understands.

Mr. Öpik: If I could get the House the Commons Library to confirm that the Welsh Office will be £55 million worse off in real terms over the next two years than it would have been under the Tories, would the Prime Minister believe me? [7030]

The Prime Minister: I have already made it clear to the right hon. Member for Yeovil (Mr. Ashdown) that the settlement has had to be extremely tight. I say to the hon. Gentleman sincerely that the only way we will get public finances under control is to take the measures that we have taken, including those that were in the Budget. If we do not do that, we will end up with old Tory boom and bust, and we are not going down that route.

Dr. Lynne Jones: Will the Prime Minister join me in welcoming the decision of the employment appeals tribunal that gives transsexuals the protection of the Sex Discrimination Act 1975? Does he agree that more needs to be done to help to combat the appalling discrimination faced by sufferers of gender dysphoria? In particular, they should have the right to have their birth certificates amended to give their correct gender. [7031]

The Prime Minister: I have not seen the tribunal decision to which my hon. Friend refers, but I have no doubt that it will be studied by the appropriate people.

Mr. Donaldson: Will the Prime Minister explain how the Government's policy of no contact and no communication with Sinn Fein-IRA can be reconciled with the approach of the Secretary of State for Northern Ireland, who has confirmed that there have been six telephone calls with Sinn Fein, and that the Government responded to Sinn Fein by letter on 9 July? Has the Prime Minister's repudiation of Sinn Fein-IRA following the murders of the two policemen in Lurgan now been set aside, and is a new policy being pursued?

The Prime Minister: No. What we said after the Lurgan murders is that there would be no meetings between Sinn Fein and the Government, and there have been no such meetings.
It is correct, as my right hon. Friend the Secretary of State has made clear, that there have been responses to telephone calls and letters, and I shall tell the hon. Gentleman why. I want a situation in which either Sinn Fein gives up violence and comes into inclusive talks or, if it does not, it is absolutely clear that it is not coming into those talks because it will not give up violence. If this has to be given clarification so that everyone is under no doubt as to the Government's position, that will be done. The basic principles remain: consent, which is absolutely essential, of the people of Northern Ireland to any change made; and no one participating in those talks unless they give up violence unequivocally and clearly.

Mr. Llew Smith: Madam Speaker—[Interruption.] I am obviously grateful for the howls of support.
Over the past 12 months, I have tabled approximately 100 questions and have had two Adjournment debates on matters relating to measles, mumps and rubella


vaccinations. Would the Prime Minister care to comment on the dramatic increase in the number of children suffering from Crohn's disease and autism after such vaccinations? Will he commit himself to organising independent investigations—I emphasise the word "independent"—into possible links between those vaccinations and the diseases? [7032]

The Prime Minister: I am grateful to my hon. Friend for raising this issue, which I know he raised in an Adjournment debate earlier. In assessing the evidence on this matter, the Government rely on the independent expert committee, the Joint Committee on Vaccination and Immunisation, and we follow its advice. It has considered all the evidence of a link between the measles, mumps and rubella vaccine and autism and Crohn's disease. It concluded that, on balance, no such link existed. This evidence, I am advised, is kept constantly under review and is reassessed and re-evaluated. Should there be any change in that, of course the committee will act on it, and so will the Government.

Mr. Spring: When the right hon. Gentleman next travels to his constituency, will he look afresh at the delicate balance between our cities and towns and the countryside? Is he aware of the real concern among many people who live in our country areas that their way of life is under threat and that their interests are marginalised? Does he, as Prime Minister of the whole of our country, not recognise the illiberal inconsistency of his supporting and defending the often quite genuine concern and viewpoints of many minorities in our country, while denying the self-same freedoms to those with whom he happens to disagree? [7033]

The Prime Minister: Of course we do not want to see conflict between town and countryside. The issues that the hon. Gentleman has raised and the points that he has made will be weighed by all Members of Parliament in the run-up to the vote on the Bill. I am sure that every hon. Member will look at it very carefully. I do not believe that there should be any conflict between town and countryside that prevents us from examining this issue dispassionately and properly.

Mr. Blizzard: I should like to say how much people in my constituency will welcome this morning's announcement on the reintroduction of fairness to the national health service. Will my right hon. Friend comment on the importance of efficiency and the effective use of resources in the national health service, particularly in the light of comments that were made to me yesterday by a most senior consultant director in my local NHS trust, who said that there was no doubt that the internal market has been an enormous waste of resources which is depriving patients of the care they need?

The Prime Minister: My hon. Friend is absolutely right. Of course, one of the reasons for getting rid of the internal market that the Conservatives introduced is the enormous cost—£150 million a year just to administer fundholding. If we look at the way in which the NHS has gone in the past few years, we see that one of the reasons why this Government were elected was to restore the

national health service as a proper national health service, based on need, not ability to pay, and that is a manifesto commitment that we will carry out with pride.

Mr. Tyler: I accept that some welcome progress has been made in dealing with the bovine spongiform encephalopathy crisis caused by the previous Government, but may I ask the Prime Minister whether he has had drawn to his attention the critical situation that is developing in cattle markets throughout the country, from Caithness to Cornwall, as a result of the reduction in the over-30-months scheme payments which will be made on 4 August, and the consequent collapse in beef prices? Those prices are now down to about a third of what they were last year. Will the right hon. Gentleman's Ministers be prepared to meet those of us from livestock areas who have this crisis on our doorstep? [7034]

The Prime Minister: I am sure that the Minister of Agriculture, Fisheries and Food and the Department will be prepared to meet anyone with a concern about this issue. The hon. Gentleman will realise that the problem is that it is necessary to try to get the costs of the compensation scheme down, because they will run over a period to about £4 billion. It is essential that we try to reduce those costs. I am aware of the situation in the cattle markets and I am sure that that is one of the reasons why the matter will be closely examined by the Minister of Agriculture, who will be in touch with the hon. Gentleman.

Mr. Hanson: Will my right hon. Friend join me in welcoming yet again the fulfilment of another Labour pledge—the publication of the devolution White Paper next week? When will he be able to come to Wales to campaign for the yes vote, and what steps does he intend to take to ensure that there is a massive yes vote, which the people of Wales so richly deserve? [7035]

The Prime Minister: I believe that these proposals will give Wales a strong voice. They will improve the decentralisation of government, which is important for the long-term future of this country. I shall go to Wales on Friday, and I have no doubt that I will be going to Wales many times during the forthcoming months.

Mr. Tyrie: Will the Prime Minister tell the House and the country what he meant when he said some months ago that Labour had no plans to raise taxes at all? [7036]

The Prime Minister: We actually set out in our manifesto very clearly the commitments on tax. We have kept to those manifesto commitments. We have also kept to the commitment that we gave that we would introduce a windfall tax to cure the problems of unemployment in this country. We said that we would increase expenditure on schools and hospitals, and we did so. The difference between this Government and the old Tory Government is that we make promises and keep them.

Mr. Pike: The Prime Minister will know that many people in low-pay constituencies such as mine, Burnley, will be very concerned by what the Leader of the Opposition said earlier today about working conditions. Will my right hon. Friend repeat the news that this Labour


Government are committed to giving a fair national minimum wage as soon as possible to the people of this country?

The Prime Minister: My hon. Friend is absolutely right. One thing that I did not mention to the Leader of the Opposition is that, in the United States, for example, which has a lower unemployment rate than we do, there is a minimum wage. There will be proper and fair treatment for people, first, because it is right in its own terms and, secondly, to save the vast public expenditure on benefits in the present system. What sticks in my craw is Tory Members attacking the minimum wage when they would never for a single instant have any relative of theirs paid that amount of money.

Mr. Luff: Why does the Prime Minister think that there are more people in work here and fewer jobless—[Interruption.] I am sorry that Labour Members think that is funny. Why does the Prime Minister think that there are more people in work here and fewer jobless than in any other European Union country? [7037]

The Prime Minister: I have already given the hon. Gentleman the example of the United States, where fewer people are unemployed, but, as I said to his leader just a few moments ago—the hon. Gentleman should have listened—there were more people unemployed when the Tories left office than when they came to office. They shake their heads. I suggest that they go to the same House of Commons Library and see the figures.

Mr. Gunnell: Will my right hon. Friend welcome today's inward investment in Yorkshire, and join the Deputy Prime Minister, who is welcoming that investment on-site? Does the Prime Minister agree that the combination of a Labour Government and Labour-led local authorities, all committed to inward investment, will improve our performance in coming years?

The Prime Minister: My hon. Friend is right, and we welcome that inward investment. It is very good news. I seem to remember being told before the election that all the inward investment would dry up once Labour came to power. Another Tory lie bites the dust.

Mr. Welsh: Does the Prime Minister intend to introduce a proportional representation voting system for future European Parliament elections? If so, will he guarantee that the distinctive political systems in Scotland and Wales are specifically recognised in any such set-up? [7038]

The Prime Minister: It is our clear manifesto commitment to introduce proportional representation for elections to the European Parliament. The electoral systems in Scotland and Wales will be set out clearly in the White Papers on devolution that will be published shortly.

Mr. Sheerman: My right hon. Friend shares with me an enthusiasm for the European Union, but does he share my concern that there should be a strict criterion of democratic excellence before we allow enlargement? My constituents have expressed two worries. The first is that many of the European countries coming into the EU

do not have a long track record of being stable democracies. The second is that they will be a net drain on the EU's resources. Will my right hon. Friend keep a careful eye on progress and ensure that our national interest is not damaged by the new entrants?

The Prime Minister: My hon. Friend is right to draw attention to some of the difficulties associated with enlarging the European Union. However, I think that enlargement is right as a process. This country should be fighting for changes in some of the ways in which Europe works to ensure that enlargement happens in the best way possible for existing countries as well as those coming in. Chief of the changes will be fundamental ones to the common agricultural policy. The way in which it works is a disgrace, and it should be reformed in the interests of all the people of Europe.

Mr. Burstow: Has the Prime Minister seen the report published by Scope today, which reveals that, of the polling stations surveyed, 81 per cent. had two or more access problems? Will he take urgent action to deal with the issue? In particular, will he consider the problems of blind or partially sighted people and introduce any necessary legislation that will enable them to vote unaided and in person at polling stations by using Braille templates and large print? [7039]

The Prime Minister: We welcome the study by Scope, and we will take its suggestions seriously. It is obvious that people should be entitled and able to vote irrespective of any disability they have. As most people found at the last election, the current position is not satisfactory. We will look at any ways to improve it.

Mr. Mike Hall: Does my right hon. Friend agree that the announcement by the Economic Secretary of a reversal of the cut in the number of customs officers will help this Government in their fight to combat drug crime?

The Prime Minister: My hon. Friend is absolutely right. One of the biggest worries about the cut in the number of customs officers was that it would impede the fight against crime, especially international crime. My hon. Friend will be aware of the discussions that the Foreign Secretary has been having in Moscow. It is important that we have the right controls and checks on our frontiers so that we can bear down on any form of international crime coming into this country from the rest of Europe. It is an extremely serious problem, and one of the matters that will form the centrepiece of our presidency of the G8 summit next year.

Mr. Stunell: Does the Prime Minister accept that figures supplied by the House of Commons Library show that the total to be spent on education next year will be only £10 million more, allowing for the changed inflation allowances? Does he further accept that that comes on top of large cuts in education in this financial year by many authorities throughout the country? [7040]

The Prime Minister: I do not accept that education authorities will not get the benefit of the money that will go into education next year. The hon. Gentleman is right to say—I say this to all his hon. Friends who are raising this issue—that the settlement will be tough; there is no doubt about that. We have a simple choice: we can go back to the days of the early 1990s, with a borrowing requirement of more than £40 billion, with all the damage that that did, or we can take the action which is necessary now to put our finances on a prudent and stable footing. The money from the windfall tax going into school repairs and the additional funding for education together make the largest single injection of finance into education that any Government have made for some time.

Mr. Barry Jones: Does my right hon. Friend recollect visiting the Raytheon Jets factory last September? May I persuade him to instruct the Secretary of State for Defence to award a contract for my constituent to service the very jets that the Ministry of Defence now flies?

The Prime Minister: I certainly admire my hon. Friend's audacity, although I do not think that it would be appropriate for me to award contracts to any company

from the Dispatch Box. I know the Raytheon Jets factory very well, and I am sure that it will submit an excellent bid.

Mr. Soames: On the day that the Secretary-General of the United Nations is to unveil a programme of reforms, will the Prime Minister reflect for a moment on the extraordinarily distinguished role that the United Kingdom has played over the years in the United Nations, not least in peacekeeping operations, in which our troops have given a golden account of themselves? Will he tell the House precisely what his ambitions are for reform of the United Nations?

The Prime Minister: I agree entirely with the hon. Gentleman's sentiments on the United Nations and the part that Britain has played in it. We are proud of playing a major part in founding the United Nations. United Nations forces—in which Britain has played such a notable part in recent years—have done an outstanding job, and I congratulate all those who have been involved in them. The most important aspects of UN reform are that it reforms internally, in its secretariat, and externally, by drawing up the right principles to allow us to decide when it is appropriate to intervene and when it is not. The Government intend to be heavily involved in that process, and I believe that the new Secretary-General has made an excellent start in his work on both aspects.

GP Fundholding

Mr. John Maples: (by private notice): To ask the Secretary of State for Health whether he will make a statement on his plans for GP fundholding.

The Secretary of State for Health (Mr. Frank Dobson): My announcement today of fair waiting lists for patients of all general practitioners is an attack on unfairness. It is not an attack on GP fundholding. The previous Government introduced the internal market into the national health service, creating a two-tier system in which patient was set against patient, and GP was set against GP. That was unfair to patients and repugnant to the doctors and nurses who had to apply the system, and it cost a fortune in extra paperwork.
At the general election, we promised to restore fairness to the health service, to end the two-tier system and to ensure that access to treatment is based on need, and need alone. We pledged to change the system so that no patients and no GP practices should suffer any longer from the unfairness introduced by the Conservatives. We are keeping that election promise.
From now on, all NHS trusts must operate a fair waiting list for urgent admissions, regardless of who is commissioning the care. With effect from 1 April 1998, when current contracts run out, all health authorities must establish common waiting time standards for all people living in their area. From the same date, health trusts must not offer preferential treatment to any particular group of patients from health authorities, regardless of whether they are patients of GP fundholders. Faster treatment must be provided only on accepted clinical or social grounds. That change will be fair to every patient, and will be more comfortable and acceptable for doctors and nurses to operate.
My announcement today has been welcomed by the British Medical Association, the Royal College of Nursing and the NHS Confederation. The National Association of Fundholding Practices has made it clear that it fully accepts the principle of fair waiting lists and that, if properly implemented, the new policy will benefit all patients.
In two thirds of all health authorities, the patients of non-fundholding practices have to wait longer for hospital treatment. What is not so well known is that, in the other one third, the patients of GP fundholders lose out under the present system.
We are determined to have a national health service which is fair to all patients. That fairness will be achieved through co-operation in place of the competition and division of recent years. It will be achieved by levelling up to the best that has already been achieved, not by levelling down.
In our general election manifesto, we recognised that the development of fundholding had brought advantages as well as disadvantages. We promised to remove the disadvantages. We are keeping that promise. A month ago, we set out to bring fairness to the financing of non-fundholder practices. Today, we are bringing fairness to their patients.
We are now consulting the professions and patient organisations on how best to develop a primary care system fit for the next century, in which doctors and

nurses can play a leading part in planning local health services for all the patients in their area. In this way, we hope to reconcile the better aspects of fundholding with fairness for all patients. We are discussing this with all the professionals involved, and will test out our proposals through pilot schemes in every part of the country.
The new system, like the announcement that I have made today, will be based on the principle that access to health care is based on need, and need alone. That is the principle of fairness, quality and equality on which the Labour party founded the health service. It is the principle of fairness, quality and equality on which we will run the national health service so that it is fair to every patient. Who could possibly quarrel with that?

Mr. Maples: Well, the chairman of the Association of Fundholding Practitioners for one, because he did so on the radio this morning. Perhaps the Secretary of State has got at him since, but this morning on the radio he was expressing considerable reservations.
What we have just heard is a prologue to the slow death of fundholding in the national health service. [HON. MEMBERS: "Hear, hear."] That is the authentic voice of the Labour party. It is happy that it is going to be abolished.
Fundholding has been one of the great successes of the NHS over the past few years. It has put money, power and responsibility in the hands of GPs. They are the people who really understand their patients' needs and who know their local hospitals and local consultants. More than half of GPs have voluntarily become fundholders. They account for more than 60 per cent. of all patients. There would be many more if the Secretary of State had not balked at the last wave. Doctors have voted the scheme a success.
We believe that the Secretary of State plans a slow death for fundholding because it does not fit his model. He knows best, and he plans to direct everything from Whitehall. The idea that individuals should be trusted to make decisions or take initiatives is anathema to him and his party. It is the beginning of the end for fundholding. [HON. MEMBERS: "Ask a question."] There will be some questions—do not worry.
If the Secretary of State does not believe us, perhaps he will believe the Audit Commission, which said:
There is evidence that the direct involvement of GPs had led to improvements in service".
The Organisation for Economic Co-operation and Development said:
GPs seem to have done a better job of purchasing … GPs have been prepared to diversify providers, challenge hospital practices and demand providers".
The King's Fund described fundholding as one of the major successes of the reforms, and an Edinburgh university study found that it had achieved savings.
Professor Glennerster, a former member of the Labour research department, said:
All the dire predictions … were unfounded.. efficiency gains had more than outweighed costs.
By any standard, fundholding has been a great success. The Secretary of State's excuse for beginning to dismantle it is that it has produced a so-called two tier NHS. Let us be clear that it is an allegation—[HoN. MEMBERS: "Question."] It is an allegation—

Madam Speaker: Order. I remind hon. Members that this is a private notice question and that the Member who


tabled it has to ask a question on the statement that has been made. Of course I allow hon. Members to make a preamble—that is absolutely right—but this preamble is rather long. I think we now have to have pertinent questions.

Mr. Maples: I am coming to the end of the preamble.
Equality is best pursued by maximising opportunities, not minimising them. Arguing about a two-tier health service is akin to saying that equality in human need is best achieved by starving everybody.
Why does the Secretary of State not extend the power held by fundholders to all GPs and all patients? Why not extend to everyone the advantages of a successful experiment? Will he give us a cast-iron assurance that his policy is not to destroy or neuter fundholding? Will he give a cast-iron assurance that GP fundholders will continue to be free to refer their patients to the consultants and hospitals of their choice? The Secretary of State wanted specific questions, but he is not making any note of them. Will he give a cast-iron assurance that GPs will have the power and the money to make those referrals?
Thousands of fundholding GPs and millions of their patients want answers to those questions. If the Secretary of State cannot give us those answers, we and they will know what we have long suspected—that he plans to end the most successful experiment ever in improving patient care and NHS efficiency. If that is what he plans and does, patient care will deteriorate, waiting lists will increase and he will go down in the history of the NHS as a vandal as well as a dinosaur.

Mr. Dobson: I think that the hon. Gentleman was better when he was asking questions. He should consider the interests of patients in his area. In his constituency, as in the constituency of the right hon. Member for Fylde (Mr. Jack), the shadow Minister, the patients of fundholding practices are treated more slowly than others. He should pay a little attention to the people whom he allegedly represents.
I assure the hon. Gentleman that what we have announced today has the support of the British Medical Association, which represents all doctors, the Royal College of Nursing and the National Health Service confederation. Mr. Rhydian Morris, who represents fundholders, has explained to me that they support in principle our effort to establish fair and common waiting lists, provided we do that effectively and deliver on our aims. We shall do that.
The hon. Gentleman's contribution shows that the Tories are not interested in patients or in fairness. They are still obsessed with institutions that they introduced, largely on the advice of a heroin addict and prescription fraudster. We are not prepared to continue that system. We shall replace it with a system that will be the product of consultation with all doctors, all nurses and all people involved in providing primary care. We need a decent primary care system that is fair to every patient of every practice. We shall bring that about.

Dr. Howard Stoate: Is my right hon. Friend aware that many GPs, including fundholders, are far from happy with the fundholding system as it stands? Is he

further aware that many GP fundholders entered fundholding only because they felt that they had to? Many of those fundholders are trying to get out of fundholding, because they know that it has not been best for their patients.
Is my right hon. Friend also aware that the Audit Commission report showed that 70 per cent. of GP fundholders were unable to manage their funds as well as they might because they did not have the necessary management expertise and skills available? Does he therefore agree that a far better model for primary health care provision would be locality commissioning, which would mean lower bureaucratic costs, better management expertise, a far better deal for patients and, above all, more efficiency for the NHS, using public funds most effectively for the benefit of all patients? That would also lead to equality in waiting lists, and therefore a better service to patients.

Mr. Dobson: I welcome my hon. Friend's contribution, drawing on his professional experience as a doctor. I assure him that our consultation on the future of primary care will include all representative organisations, including the representatives of fundholding GPs, who have said to our faces that they approve of the changes that we are making and of our approach to the further changes that we intend. We believe that that is the way forward. We want to carry the profession with us and do not want to force people to do things that they do not want to do. It is my belief that the bulk of the medical profession and the bulk of the nursing profession want to do the best by their patients. That is why they support what we have announced today.

Mr. Simon Hughes: The Secretary of State is right. On all three points we support him, and on all three points the Conservative spokesman, the hon. Member for Stratford-on-Avon (Mr. Maples), is wrong. Fundholding, with the right to buy advance treatment, is wrong and unfair, and should go. That does not necessarily mean the end of fundholding. Fundholders support the announcement, and are clear that such advance treatment is unjustified. Fundholders' representatives, including the very man who was on the radio this morning speaking for fundholding doctors, have told me so to my face. The Secretary of State has our unreserved support, and I am delighted that he has been able to make the announcement.
The follow-up question that will be in people's minds is whether, given that we have abolished the two-tier system for GPs, the Secretary of State has in mind the abolition of the multi-tier system which results in shorter treatment times in certain parts of the country and much longer treatment times in other parts. How soon one is treated is, in effect, a national lottery. When will the other manifesto pledge to treat more people, and, by implication, to bring down waiting lists for all, be achieved?

Mr. Dobson: We are treating more patients. This year, we shall be devoting to patient care £100 million which would have been spent on bureaucracy. Of the £20 million that we will save from the bureaucracy of the eighth wave of fundholding, £10 million is being devoted to breast cancer treatment and £5 million to improvements in


children's intensive care. I thank the hon. Gentleman for his welcome for our proposals, but I have forgotten what his other question was.

Mr. Robin Corbett: Those of my constituents who did not have fundholding GPs and were told that they had to wait a minimum of nine months for treatment were very upset when they found out that patients of fundholding GPs had to wait only a maximum of six months, so they will commend what my right hon. Friend has said today. Will he include pharmacists in the consultation about primary care? They have an important role to play.

Mr. Dobson: On the latter point, I can assure my hon. Friend that we shall be consulting everyone involved about the future of primary care and how we can extend the roles of the various professions so that they meet the needs of patients who are feeling poorly. That is the most important thing that we can do.
I think that everybody realises that the present system is manifestly unfair. The bulk of people in this country are profoundly fair people and they want a fair system; they have an unfair system. Such unfairness was emphasised by James Johnson, the chair of the BMA's central consultants and specialists committee, when he said:
The present two-tier system is manifestly unfair to patients.
Even more important, he said:
Elective surgery patients are no longer being treated on the basis of clinical need.
We will put a stop to both those things.

Mrs. Virginia Bottomley: Is the right hon. Gentleman aware that the real strength of GP fundholding has been to change totally the balance of power in the NHS towards the family doctor? Is not his real problem that, having so failed with the Chancellor of the Exchequer to get even the amount of money secured for this year by his predecessor, he has already been condemned by the BMA, so, rather than take any steps to help patients, he has thrown an ideological bone to his Back Benchers? It is a classic Labour party levelling down, not levelling up, and no patient will benefit.

Mr. Dobson: All I can say about funding is that, as a result of the decision announced by my right hon. Friend the Chancellor of the Exchequer, the NHS in England will gain £1.7 billion more next year in comparison with this year—the Budget set by the Cabinet of which the right hon. Lady was a member. If we are expected to take lessons from her about ways of organising the health service, I can only presume that she is saying that she was not one of the Tory Ministers whom Clive Froggatt came to see—before which, according to his memoirs, he used to shoot up.

Ms Julia Drown: My constituents and I welcome my right hon. Friend's statement, as does the BMA—I have just come from a meeting with it. Does my right hon. Friend agree that his statement will be welcomed not only by the doctors and nurses he mentioned, but by many health care workers? As a former finance director in the health service, I was deeply affected by the internal market introduced by the previous Government.
Before the internal market, I could tell patients that, however difficult the financial circumstances of my hospital, they would be seen in order of clinical priority. If they had the most urgent need, they would be first to be seen by the doctor. It was deeply destructive to doctors, nurses and administrative staff who dealt with patients to turn that round and to have to say, "I am sorry, but it now depends who your doctor is." I welcome with open arms the return of a national health service in which, once again, patients are seen in order of clinical priority.[Interruption.]

Mr. Dobson: I thank my hon. Friend for her endorsement of my announcement today. It is revealing that her direct experience, like that of my hon. Friend the Member for Dartford (Dr. Stoate), of the problems caused by the internal market is received with mockery by Opposition Members—sorry, I should say Tory Members, in fairness to the Liberals.

Mr. James Paice: The right hon. Gentleman will know that one of the benefits of fundholding has been that doctors could send patients to the hospital most appropriate for their needs and often most convenient geographically. In my constituency, many people live in one health authority, but the best and nearest hospitals are in a different health authority area. Will the Secretary of State answer the question put by my hon. Friend the Member for Stratford-on-Avon (Mr. Maples) and confirm that fundholding GPs will still be able to send their patients to the hospital most suited to their needs, or will there be some form of central direction of the hospitals they should attend?

Mr. Dobson: The hon. Gentleman ought to recognise that, until the Conservative party made its changes—[HON. MEMBERS: "Answer the question."] I am answering the question. Before the Tories made their changes, any GP in any part of the country could refer any patient to any hospital that he thought suitable. The Tory party took away that right and then started to hand it out as a privilege. We will ensure that all doctors are in the same position to look after their patients and exercise their clinical judgment, which the fundholding system took away from far too many doctors.

Laura Moffatt: As a nurse who worked in the health service for 20 years, may I share with my right hon. Friend what such an announcement will mean for my many former colleagues? I am so sad to hear the comments from Tory Members about ideological bones, because I can honestly tell my right hon. Friend that—

Madam Speaker: Order. I am sorry to interrupt the hon. Lady. I have tried to explain that when we are in Question Time hon. Members must ask the Secretary of State a question. I understand the hon. Lady's anxiety and keenness about the statement that has been made and I am sure that she endorses it—I would expect her to do so from the Government side of the House—but she must put a question to the Secretary of State and not make a long speech. I hope that we will soon have a debate on


the health service and I will be able to call anybody who wishes to make a statement. Meanwhile, let us have a question.

Laura Moffatt: Is my right hon. Friend aware that we desperately need some improvement in the morale of health service staff?

Mr. Dobson: I entirely accept the point made by my hon. Friend in her excellent question. [Interruption.] Well, there was more of a question than we had from the hon. Member for Stratford-on-Avon (Mr. Maples). My hon. Friend is right. The fact that doctors, nurses and others working in hospitals had to treat one patient unfairly compared with another was etched deeply into the morale of all concerned. They will be delighted that that rotten, unfair system is to end and be replaced by one that is fair.

Sir Richard Body: With respect, I wonder whether the Secretary of State has quite answered the questions from two of my hon. Friends. They asked whether fundholding doctors would still be able to send their patients to the consultant of their choice. The Secretary of State referred to the hospital of their choice. There is a distinction. Will he make it plain that, if his proposals are accepted, fundholding doctors will not be able to send their patients to the consultant of their choice?

Mr. Dobson: I am sorry, but the hon. Gentleman, for whom I have considerable respect, has missed the point. Fundholding doctors can keep sending their patients to the hospital of their choice and to the consultant of their choice, but neither the hospital nor the consultant can promise to treat them more quickly than another patient equally deserving of treatment.

Mr. Eric Illsley: I welcome my right hon. Friend's announcement, especially, as two years ago, the Sheffield hospitals trust refused all clinical admissions other than those of patients of GP fundholders. Is he aware that a GP fundholding practice in my constituency, which has made underspends of £300,000 over the past few years, has spent that money on buildings which now belong to that practice? Figures for the latest financial year show that practice with an overspend of

£80,000, which now falls to be met by the district health authority. Will my right hon. Friend put an end to such malpractice?

Mr. Dobson: As I understand it, any overspending this year will be taken from the practice's future budget, so things should even out. We want a system in which all practices get a fair share of the national health service resources. The measures that we announced about three weeks ago are intended to deal fairly in financial terms with non-fundholding and fundholding practices. That is what the representatives of the non-fundholders say they want, and so do the representatives of the fundholders.

Dr. Evan Harris: I, too, welcome the statement by the Secretary of State. From talking to former colleagues at the BMA this morning, I can confirm that they also welcome the abolition of that two-tier system. Is the Secretary of State aware that doctors are concerned about another two-tier system? Those people on long waiting lists who can afford to go privately can jump the queue, leaving those without means to wait even longer. Does he have any proposals to prevent waiting lists this year getting longer and longer for my constituents in Oxford and those of other hon. Members?
I remind the Secretary of State of the question from my hon. Friend the Member for Southwark, North and Bermondsey (Mr. Hughes). Can he say when waiting lists will come down by the 100,000 that he promised in the Labour manifesto?

Mr. Dobson: I am not making any wild promises about when waiting lists are coming down. I have been looking at the facts. At present, waiting lists are the highest that they have ever been in the history of the national health service. When we took over, they were rising faster than they have ever risen, and there is still a great deal of momentum behind that rise, so we cannot promise any short-term reductions.
If there is a harsh winter, I have said—and I take responsibility for it—that the first priority for the hospital service must be to deal with emergencies. If that means that the waiting lists must rise in order for the emergency demands to be met, I will take responsibility for it. That is what one must do when one is in government.

Several hon. Members: rose—

Madam Speaker: Order. We shall now move on.

Foreign Income Dividends

Mr. David Heathcoat-Amory: On a point of order, Madam Speaker. I wish to raise a matter concerning the status of the Finance Bill and whether it represents the will of the House at Second Reading. On Friday before last, the Paymaster General implied in the House that the Government were having second thoughts about the treatment of foreign income dividends. He said that he was
looking sympathetically at the position of UK-based groups with a substantial amount of foreign income."—[Official Report, 4 July 1997; Vol. 297, c. 586.]
He realised that many such groups would be driven away from the United Kingdom if the Finance Bill were enacted in that form.
The following week, at Question Time, the Economic Secretary to the Treasury said that no changes were envisaged. However, confusion was created the same day by the Chief Secretary to the Treasury, who said that the position of the Government was "absolutely clear". He added:
The situation is widely understood, particularly by those affected".—[Official Report, 10 July 1997; Vol. 297, c. 1068.]
Since then, it has become clear that the position is far from widely understood, and emergency consultations are taking place between the Treasury and a number of United Kingdom financial groups, as has been widely reported in the press.
My point of order for you, Madam Speaker, is that you have always been vigilant to ensure that the House is the first to know of any change in the treatment of legislation. Further than that, although the Bill has received a Second

Reading, we now learn that it does not represent the intentions of the Government. The House has voted on a false prospectus.
Furthermore, the Bill is now in its Committee stage, yet the matter is not only unresolved but has been the subject of contradictory statements by Ministers. I know that you, Madam Speaker, cannot force Ministers to come to the Dispatch Box and explain themselves, but, as the matter affects legislation now before the House—indeed, later today we are to debate the very clause affecting foreign income dividends—will you agree to a postponement of those proceedings until the matter has been resolved and clarified by those on the Treasury Bench?

Madam Speaker: No, I cannot agree to postponing the legislation. As far as the Chair is concerned, it is perfectly in order for us to continue with our proceedings in Committee as arranged. The right hon. Gentleman will, of course, be aware that there is a Report stage to come, and we ought to be a little cautious about such points of order at this stage in Committee. If the right hon. Gentleman has other matters to raise, no doubt those on the Treasury Bench will be able to respond to the political arguments that he puts. Our procedures are perfectly in order at this time.

BILL PRESENTED

ELECTIONS (VISUALLY IMPAIRED VOTERS)

Mr. Paul Burstow, supported by Mr. Harry Barnes and Mr. Peter Bottomley, presented a Bill to make provision for blind and partially sighted people to vote unaided in person at elections through the use of braille template and large print; and for connected purposes: And the same was read the First time; and ordered to be read a Second time upon 13 February 1998, and to be printed [Bill 50].

Animal Health (Amendment)

Mr. Paul Flynn: I beg to move,
That leave be given to bring in a Bill to improve the welfare of animals in quarantine; and for connected purposes.
Our quarantine laws are cruel to animals and distressing to their owners. Those laws are entirely irrational, unnecessary and inefficient. They cost the taxpayer £1 million a year, and animal owners £5 million a year. They survive only because of the previous Government's reluctance act in the face of all the objective opinion, including the unanimous decision of the Agriculture Select Committee, that there was no need for the present system to continue for animals coming from rabies-free countries, especially in Europe.
Quarantine has played little or no part in reducing the incidence of rabies worldwide. That has come about through the use of vaccine, and there is now a sophisticated and far superior method of controlling the spread of rabies, as well as controlling other diseases coming in from other countries.
Most countries, especially the Scandinavian countries, have abandoned quarantine as archaic, inefficient and even dangerous. It is dangerous, because people seeking to evade the six-month quarantine period smuggle animals in. We know that 374 dogs and 234 cats were smuggled in the past six years—and those represent the cases that were detected. There will almost certainly be many thousands more coming in, and we do not know whether they have been vaccinated, or from what countries they come. They may come from countries where rabies is endemic.
The superior system should be used in this country, and I believe that the Government will have the courage to challenge the general public's prejudiced and ill-informed view of the dangers of rabies. Sadly, past Governments have played on people's emotions and vastly exaggerated the threat.
It is extraordinary how futile the process has been: 200,000 animals have been held in quarantine since 1970, and there has not been a single proven case of rabies among them. The last two cases of rabies that we had were in the 1960s, and both the animals had been held in quarantine.
It is extraordinarily unfair that, with certain precautions, we allow bred animals, such as racehorses and cattle, to enter in great numbers. More cattle come into this country from France alone than do dogs from all the rest of the world, yet every warm-blooded mammal can contract and pass on rabies. It is sobering to realise that more people than dogs—13 people since 1974—have entered the country suffering from rabies.
We put our citizens, and especially service men and others who serve this country abroad, at a great disadvantage, and we do not help the disabled: a concession was refused for dogs for the blind, which seems very mean to me. The fact that concessions are allowed exposes the futility of the present laws.
I know that the Government are considering major reforms and that the robust campaign being conducted by Passports for Pets and the Royal Society for the Prevention of Cruelty to Animals will bear fruit. The purpose of my Bill is to correct a major defect in the law

that prevents welfare facilities from being guaranteed for animals in quarantine. The Government currently have no power to enforce animal welfare standards in kennels and the RSPCA cannot insist on inspection of quarantine areas.
Many quarantine kennels are run well by people who are doing their best, but it is impossible to overcome the trauma for domestic pets who are parted from their owners and suffer terribly because of their incarceration. Even worse are those rogue kennels that treat animals in an abominable way. Sadly, there is a great deal of evidence of that.
I have testimony of 100 cases of bad treatment by kennels, and I shall refer to one or two. I will not mention the names of the kennels on this occasion, but I may well do so another time. A lady told of how her dog had gone into kennels and she recognised that he had something wrong with his eyes. She tried to get him to a specialist, although the kennel owner was against it.
The dog was eventually taken to a specialist, who went mad and asked why the manager of the kennels had not brought the dog to her earlier. The lady got no support from the kennels and was sworn at by the owners. The kennels were filthy, and there was no effective heating, no exercise and a bad food supply. The animal went blind.
Another lady talks of her three cats in kennels. One died after a couple of months from flu-like symptoms, and another died some time later from an infection, picked up in the kennels, that travelled to the animal's brain.
Another lady talks of her dog who went into kennels that were permanently running with water. She had to ask the managers to clean the dog, because he was in such a state and his feet were sore. She got no co-operation, the animal's bedding was not raised from the ground, he developed trench foot and finally had to have his toes amputated.
Sadly, there is an endless catalogue of cases in which there has been no access to the kennels for those who should be helping out and should be able to inspect them. There is a misapprehension that, because inspections are carried out by the Ministry of Agriculture, Fisheries and Food, the kennels and other quarantine areas are approved. The Ministry has only to inspect the security of the site and ensure that the animals will not escape. There is no guarantee of the welfare standard.
We must look forward to the major reform of quarantine, but this modest Bill can and will become law—people are usually cynical about ten-minute Bills and suggest that they have no chance of becoming law, but 59 have. I hope that the Government will co-operate on the Bill. I know that the Ministers are sympathetic to its aim and I hope that they will ensure it a swift passage so that we correct this defect, which was an error or an oversight in the Animal Health Act 1981.
In the House, we all recognise our duty to protect defenceless animals from unnecessary and avoidable suffering. The appalling conditions in some of our kennels besmirch our reputation as a nation of pet lovers. The Bill will bring force to bear to protect those defenceless animals and I commend it to the House.

Question put and agreed to.

Bill ordered to be brought in by Mr. Paul Flynn, Mr. Charles Kennedy, Mr. Edward Davey, Mr. Ken Livingstone, Mr. Nick Palmer, Mr. David Hanson, Mr. Tim Loughton and Mr. Huw Edwards.

ANIMAL HEALTH (AMENDMENT)

Mr. Paul Flynn accordingly presented a Bill to improve the welfare of animals in quarantine; and for connected purposes: And the same was read the First time; and ordered to be read a Second time upon Friday 28 November, and to be printed [Bill 51].

Orders of the Day — Finance Bill

(Clauses 1, 15, 17 and 19)

Considered in Committee [Progress, 15 July].

[MR. MICHAEL LORD in the Chair]

Clause 17

WITHDRAWAL OF RELIEF ON MEDICAL INSURANCE PREMIUMS

Mr. Tim Boswell: I beg to move amendment No. 13, in page 11, line 15, leave out from "section" to end of line 16 and insert
shall not take effect until Her Majesty's Government has published a study of the additional National Health Service spending required to accommodate the extra patients resulting from the consequential cancellation of medical insurance contracts".

The Second Deputy Chairman of Ways and Means (Mr. Michael Lord): With this, it will be convenient to discuss amendment No. 14, in page 11, line 15, leave out from "section" to end of line 16 and insert
shall not take effect until Her Majesty's Government has published an assessment of the effects of the withdrawal of this tax relief on National Health Service spending in 1997–98,1998–99 and 1999–2000.'.

Mr. Boswell: The amendment would defer the implementation of any Budget changes to health insurance until a full appraisal of their impact on the national health service and its waiting lists had taken place and been published by the Government. I am bound to say that such an appraisal is sorely needed. I will deal in due course with some of the evidence that I have on the matter, but we need an authoritative Government statement, in particular, as my right hon. Friend the Member for Wells (Mr. Heathcoat-Amory), who is on the Front Bench beside me, has been labouring hard to ascertain some of that material from the Treasury by way of written questions. He has received a number of holding answers on relevant matters, but he has not received the substantive answers. It is regrettable that we did not have the information before this afternoon's debate.
I should at the outset declare an interest in that I have been a member of BUPA for a large number of years. Despite any appearance to the contrary, I do not yet qualify by virtue of age for any tax relief. My mother, on the other hand, is also a member of BUPA, and she does.
In certain respects, this debate mirrors yesterday's debate on mortgage interest tax relief, yet there is a subtle difference in the Government's approach to the two. It is a difference in the scale of the potential revenue. The mortgage interest revenue being discussed yesterday was about £950 million in a full year. By 2000, the revenue gain from the withdrawal of this relief will be £140 million. There is, however, a considerable and significant difference in impact.
Yesterday, we sought to advance the argument that the Government's proposals on mortgage interest would have a widespread effect. After all, there are more than 10 million mortgagors. In contrast to that approach,


which I have occasionally described as saturation bombing, today involves precision bombing on a much smaller number of potentially affected persons, including those who are often least well equipped to fight back in the argument. I shall return to numbers and the impact of the proposed changes later.
If my tone is a little quieter than it was last night, it is because we would all do well to reflect that those who are likely to be affected by the proposed change have generally made a great part of their lifetime's contribution to society through their work, through voluntary work, through raising their families and through many other endeavours. When they write, they often state that they had front-line experience of the second world war and experienced times of real difficulty. They grew up through that.
In many cases, including that of my mother, we are talking of people who have relieved the national health service of costs over many years through their membership of private medical insurance schemes. It is worth saying also that they are not generally candidates for some fairly familiar procedures for younger people. For example, they are not candidates for cosmetic surgery on the NHS, nor are they candidates for orthodontia or the repair of sports injuries. Their cases typically—I use my words delicately and I hope that they will not be misinterpreted—involve the more degenerative conditions such as cataracts and the need for hip joint replacements.
Both in the NHS and the private sector of health care, the expectations of society have changed massively over the past generation. People expect to have cataracts and problems with hip joints rectified. They expect the machinery to be in place to enable them to have operations so that they might maintain or enhance their quality of life.
It is a striking fact that almost half of all health expenditure in the United Kingdom is on persons over the age of 65. In 1966, 16 per cent. of our citizens came within that sector of the population, but we look forward to the greying of the baby boom generation and, over the next 25 years, the proportion will increase to 18 per cent. The impact on the target group and, I concede, on potential savings, will increase commensurately.
It will be clear to all of us who were in the Chamber to hear the exchanges following the private notice question that the health service is under severe funding pressure. The Government, as the Secretary of State for Health admitted, are struggling to contain waiting lists. Perhaps it is not for the Committee to debate why that should be and who gave the impression that they had a magic answer during the general election campaign, but the Government promised to reduce waiting lists, and they, have offered no extra current spending to meet the problems of the health service.
In the context of an aging population and the demand for better health services and rectification of diseases linked to aging and degeneration, the Government's proposals, as set out in clause 17, are characteristic of their general approach to the Budget. They reveal some of the besetting sins that we discussed last night in respect of mortgage interest relief. First, there is haste. Haste has curtailed the reasonable representations—indeed, the time for hon. Members to consider those representations—of

responsible outside bodies on the matter and, perhaps more regrettably from the Government's point of view, led them into error. It has not been in their own interest to rush this measure. Indeed, the Association of British Insurers made the point that it would be prepared to consider phasing out the relief, but it does not want rushed changes implemented in a Budget with immediate effect from 2 July. I shall come to the specific points about that in a moment.
Haste is the first problem. The second problem, which goes through much of what the Government announced in their Budget, is an emphasis on dressing up measures of class spite as though they provide a springboard for surmounting real-world and acknowledged problems in financing public services. Even if we believe the Government's figures for savings as set out in the Red Book—a figure rising to £140 million a year from the current estimate and £120 million in the first full year—the Committee would do well to remember that that would finance the operation of the national health service for precisely 24 hours. Even if they got the lot back, the Government are not buying themselves very much time.
The third characteristic of the Government's approach to the Budget is, of course, the iron law, as we must now call it, of the Financial Secretary—in effect, "If you damage someone, you are acting with their best interests at heart." I invite the Financial Secretary—just as she argued on pensions, and just as one of my hon. Friends did on mortgage interest relief—to talk to my mother, or any other policyholder with medical insurance policies, and explain how this measure will help them.
My fourth and final point about the Government's general approach is that the present Prime Minister and Ministers on the Treasury Bench gave solemn assurances during the election campaign about their wish not to increase taxation. This measure is clearly a withdrawal of a tax expenditure, or, to put it in English, an increase in taxation. That is not good enough.
On openness and transparency, a matter that we discussed last night, I heard a suggestion from the hon. Member for Dudley, North (Mr. Cranston), who is present. Perhaps I did not do him justice in the short time allowed for the winding-up speeches. Perhaps he would have liked to say something, if only space had permitted, in his election address.
I have in my constituency a company called Freight Media, in which I have no interest but which I respect. It operates for all political parties and puts out the wagons with sandwich boards on the side that tell people who they should vote for. Indeed, the company was also in evidence at the grand prix at Silverstone this week.
I wonder whether the Government were really prepared to level with their electors and supporters, given that they are proud of the way in which they have secured, for the first time, representation on the south coast. Would it not have been more appropriate for the Labour party to tour the south coast during the election campaign, when people could still have changed their minds, with large boards affixed to the sides of lorries saying, "We do not propose to increase taxes but"—for reasons that may or may not be explained this afternoon—"we think it right that you, the elderly, should have your health insurance tax relief removed."
By way of context, it is important to flag up that the relief, which was introduced in 1990, was reduced to the basic rate by the Chancellor in 1994. Because it is credited at source, lower rate taxpayers and people who pay no tax can also join in and get the full benefit of it.
There is little evidence that the relief goes largely to the affluent. What is quite clear is that the elderly—those who have retired—are not by any means the richest, let alone the most directly influential, section of society, although some are relatively well off. The Government's proposal targets the weak in a way that I, as a Conservative, find unacceptable.
I want to analyse the Government's proposals, and I shall begin by inviting them to consider one or two points. I should make it clear to the Financial Secretary that they are not in any sense political points; they are Committee points. I hope that the Financial Secretary will do me the courtesy of listening. Although I sometimes challenge her to give an immediate response, and although I would prefer her to try to reply to my points today because of the uncertainties that may well affect some of those involved—including the providers of health insurance—I ask her to reflect on what I shall say about the detailed operation of clause 17, and perhaps introduce further measures on Report.
I concede that the Government have, to an extent, recognised that, even when a Chancellor of the Exchequer gets up to make an announcement, both providers and policyholders are caught when the music stops and there may be inequities if some smoothing relief is not given. As the notes on clauses helpfully explain, an attempt has been made to provide for the renewal of existing contracts—subject to some safeguards—as well as for new contracts that were in the pipeline.
According to my analysis, there are three outstanding points. Some of my hon. Friends who raised those points with me may well want to return to them in more detail. I am not sure whether the first is dealt with in the Bill as currently drafted, but I regard it as important. I refer to cases in which the insurance provider has passed the contract offer for the year just ahead of 2 July, which is the operative cut-off date, to ensure that contracts that are ready to go out are available for the whole year. I am told by some of the providers that there has been no phoney business and no bunching up of contracts. I feel that, when people have made normal commercial arrangements not designed to frustrate anticipated legislation, those arrangements should stand.
My second point relates to oral contracts. Both a provider and the Association of British Insurers have told me that many contracts are now arranged through telephone sales. People give credit card numbers over the telephone, and nothing is written down initially. As I read the Bill, it is pretty clear that the contract exceptions are confined to contracts in writing.
No one wants to promote gross abuse of the system, but there ought to be some way of providing for genuinely understood contracts. I am no lawyer, but I take an interest in such matters. If there is no way of providing for that type of contract, will not a real difficulty be created between policyholder and insurer in that a contract that has been undertaken orally on one basis will then be materially frustrated by a change in tax law? Such a change would create an inequity if the insurer held the policyholder to the contract.
The third point is narrower, but I think that it is important to some providers. I am familiar with it from my own experience with paying monthly for an annual contract. I understand that, for reasons that appear to relate to consumer credit law, a number of such contracts are written on the basis of a renewable monthly contract. If that is so, as I read the Bill, come 2 July it would be possible to make one such renewal, which would run until 2 August, but it would not be possible to have a full year's renewal by a series of monthly contracts. I suggest to the Financial Secretary that, if that has been the traditional and reasonable way of constructing these matters, she should consider some relief.

We are faced with a guillotine in Committee and, as a result of the Chancellor's decision, with a guillotine on these tax reliefs. It is incumbent on the Government to think hard about the transitional effects and to soften them where appropriate. I genuinely do not want to press the Financial Secretary on this matter, except to ask her to consider these essentially Committee points and see whether she can come up with some alleviation.
I shall now deal with the general issues that are more germane to the amendment. There is a continuing incoherence in the Government's figures, which is why we want a structured and comprehensive report on what is going on. It is remarkable that the Budget Red Book of 2 July refers to the potential catch in the withdrawal of this relief. It refers to a third of a million people—which is an unusual fraction for the Red Book—whereas the Financial Secretary, in a written answer 24 hours earlier on 1 July at column 108 of Hansard, referred to a written answer given by the previous Government in the shape of my right hon. Friend the Member for Fylde (Mr. Jack) on 13 March at column 322, which referred to 600,000 people. That figure seems to be in line with independent studies, although the precise number is not certain.

The Financial Secretary to the Treasury (Dawn Primarolo): If the hon. Gentleman studies the parliamentary answer to which he referred, he will see that the figure was an estimate, not an exact figure.

Mr. Boswell: If so, we were given an estimate of 600,000 on 1 July, and another estimate of a third of a million in the Red Book on 2 July. That is a divergence of almost 100 per cent.

Dawn Primarolo: I refer the hon. Gentleman to the Adjournment debate that was secured by the hon. Member for Eastbourne (Mr. Waterson). The figures were given in that debate and were confirmed in a written answer to his hon. Friend.

Mr. Boswell: I am grateful for that information. We shall reflect on what the Financial Secretary said and we shall come back to her if appropriate. Throughout this process we have had some difficulty getting answers to written questions.
The hon. Lady just said that the figure given was an estimate. That is precisely the point. We are still uncertain about the impact of this measure, which is why we are calling for a full analysis.
My second point concerns the likely impact on national health service waiting lists. On 14 July, which was after the Budget, the Minister of State, Department of Health, the hon. Member for Darlington (Mr. Milburn) was asked by my hon. Friend the Member for Romsey (Mr. Colvin) to estimate the impact on waiting lists. The Minister replied:
Any such estimate would be pure speculation. Most of the people who benefited from the tax relief were existing policy holders. It would be wrong to assume that they will turn to the National Health Service in large numbers for treatment because the relief which had not been available when they first opted for private health insurance was now being withdrawn."—[Official Report, 14 July 1997; Vol. 298, c. 78–9.]
I understand that line of argument, which is fairly familiar from the Treasury, but it is rather alarmingly plain that it is suggested that nobody knows anything about the subject. We know quite a bit about it, and what we know gives rise to concern about the Government's estimate of the saving. The matter should be more thoroughly reviewed.
Perhaps it should no longer surprise me that the Government not only cannot get their figures overtly consistent but do not appear to be able to read reports that have been commissioned from reputable outside bodies, notably the Economists Advisory Group. A detailed report, which is in my hands, was sent by that group to the Secretary of State for Health and to the Chancellor and the Financial Secretary in mid May. It must have been in their hands when they were preparing their Budget proposals.
It seems from the answer that I quoted a moment ago that the Government may be claiming that ignorance is a defence. They may claim not to have read the EAG report, which makes challenging reading. It analyses price elasticity for private medical insurance and the flows that are reported in the series, with which some hon. Members will be familiar, on private medical insurance by Laing and Buisson. It suggests some systematic flaws in those recent studies. For example, it suggests that they do not separate out the price impacts from total revenue, and the effect is that they grossly under-estimate the results of price increases on demand and the cost of medical services.
According to the Economists Advisory Group analysis, which I remind the House is in the hands of the Financial Secretary, what seems to have happened is that people have been trading down in response to the higher premiums that are required as they move into the next quinquennium of their health insurance and because health insurance is getting more expensive anyway because of higher costs and greater demands on the service. As people have been trading down, health insurance tax relief has enabled them to maintain their membership of a scheme. I did that myself, although I did not benefit from health insurance.
The danger is that people will no longer trade down, but will trade out altogether and go back to the national health service. Our amendment does not state absolutely that that will happen, but that everyone should pause while the matter is properly analysed.
Some of the proposals are a little high flown and complex, even for lay economists like me. It is necessary to put the matter in English in terms of its impact on the

individual. I was impressed by the Economists Advisory Group's quotation of the comments of one elderly policyholder:
We pay £133 a month but if the tax relief were abolished the cost would go up to £173 a month, which is really prohibitive. It seems a tragedy that we have been members of BUPA for such a long time then just when we need the cover the most we would find it expensive.
We are dealing with a known hit on a significant number of electors and constituents set against a speculative benefit to the national health service.
I draw the House's attention to one specific point that is incontestable in terms of the Red Book figures. There is a suggestion of a small saving from the withdrawal of this relief because it is being taken away midway through the tax year in year one, 1997–98. However, we know from the Budget statement that no additional funds have been made available to the national health service in the current year. All that the Chancellor did was pre-empt some of the reserve that was available for 1998–99 and commit it five months ahead of the normal time to the health service, so if even one person with private medical insurance has to chuck it in and go back to the NHS, he will go on a waiting list and there will be no extra money to fund provision for him.
If the Financial Secretary studies the analysis, she will see that there is strong resistance among insurance policyholders to increases, which tend to take place every five years as they move into a new medical insurance bracket and annually as costs rise in both the private and public sectors of the health service.
It is difficult to calculate exactly how many people will leave. I have mentioned that it appears—I do not think that the Financial Secretary dissented, but I will need to study the record carefully—that the probable net number of policyholders who will be affected by the changes is about 600,000. I am not claiming that all those people will go back. What I can say is that the EAG study worked out that, for acute major procedures only, about 30,000 policyholders per annum could go back, increasing NHS waiting lists by that number.
Two other points also cast grave doubts on the Government's arithmetic in working out the benefit to the Treasury of the changes. First, there will be a loss of insurance premium tax from any withdrawal of policyholders. The insurers estimate that that loss will amount to about £7 million a year. Secondly, the health service benefits from the use of private beds in NHS hospitals and that benefit is estimated to be about £20 million a year.
In the amendment, I have been seeking not to give a final, definitive answer to the question how many of the 600,000 people will up sticks and go back into the NHS, but to suggest that there is a sufficient problem here for the House not easily to accept the changes without a proper, published study and discussion. We could, for example, ask the Health Committee for a short report.
Many of these people will not only suffer, but indirectly impose a further load on the NHS. Frankly, we should be told more. The net effects of the changes should be properly analysed and their damaging effect on individuals avoided until these matters have been cleared up and thoroughly resolved.

Dawn Primarolo: Nice try. That is a standard ploy of oppositions: when in doubt, ask for a report. We used it


on one or two occasions. The Opposition are unable to find a genuine amendment to the clause and apparently unable to bring to bear the great intellectual depth that the hon. Member for Daventry (Mr. Boswell) suggests, so he makes this proposal.
The Committee's deliberations will be assisted if I present the facts that support the Government's decision to withdraw tax relief on private medical insurance for the over-60s. In explaining the Opposition case before Opposition Members retire to the bar, rather than when they return and are in a disruptive and public school boy frame of mind, I hope—

Mr. Boswell: On a point of order, Mr. Lord. Last night, I heard some remarks by the Financial Secretary that were in that vein and I have today again heard it asserted that Opposition Members are in some sense not treating these matters with the seriousness that they deserve and that their inability to do so is related to the consumption of alcohol. The matter has been drawn to the attention of the Chair on past occasions. I do not have a copy of "Erskine May" in front of me, but in the absence of any definite information should not the Financial Secretary be invited not to proceed further with her line of argument and, indeed, to withdraw the remarks that she has just made?

The Second Deputy Chairman: The obvious answer is for everyone in the Chamber to concentrate on the matters in hand.

Dawn Primarolo: When private medical insurance relief for the over-60s was introduced by the Conservative Government in 1990, they claimed that it would encourage the growth of insurance cover for that group in society. They did not undertake any research to find out whether it would work, and it did not. The subsidy did not secure a significant growth in provision.
When the relief was introduced, some 350,000 contracts existed, covering 500,000 individuals. Those people had already purchased medical insurance, so the tax relief was a subsidy to them. No doubt they were very grateful to receive it, but it played no part in their decision to take out insurance. The question that the hon. Member for Daventry (Mr. Boswell) must answer is, should people be subsidised for action that they would have taken anyway?

Mr. Tim Loughton: rose—

Dawn Primarolo: I will give way to the hon. Gentleman in a moment.
Since 1990 and up to 1997, the number of contracts has increased only marginally, by 10 per cent.—yet the cost to the taxpayer for that 10 per cent. increase is £140 million. Perhaps the hon. Member for East Worthing and Shoreham (Mr. Loughton) will explain why taxpayers' money should be used to benefit a very few people who had already decided what they would do.

Mr. Loughton: Later, I hope to elaborate on my comments and take up the question why, yet again, it is a Government onslaught on minorities.
I want to pick up the hon. Lady on her remarks and, with reference to the major health care providers, ask on what evidence she is basing her claim that people who took out health care insurance before 1990 have not changed during the years to 1997. What about those who have died? What about those who have been priced out of the market because the average price of pensioner health care insurance has gone up by at least 11 per cent. a year? Is the hon. Lady really saying that there has been no change in policyholders over those years?

Dawn Primarolo: Conservative Members need to make up their minds on their line of argument against the Government. The hon. Member for Daventry said that people were long-standing contributors to the schemes and that they should not be deprived of them. Now, the hon. Member for East Worthing and Shoreham is taking a different line, saying that that is not the case.

Mr. Boswell: The substance of my argument was that some members were long-standing contributors, and that they had some wish, in equity, to get some benefit from their long-standing withdrawal from imposing, at least partially, any cost on the NHS. Equally, some were marginal cases and might otherwise have stayed with the NHS rather than subscribe to private medical insurance.
The matter is not entirely clear, but it could be clarified by the sort of report for which we have asked. If the hon. Lady does not wish to produce one, I suggest that she speaks to those who produced the EAG report, and explains what is wrong with the calculations in it.

Dawn Primarolo: I shall demonstrate that insurance companies—by using information that they themselves have provided; and they provide the insurance cover—expect that there will be almost no impact on the number of people who have insurance policies. Already those companies are offering solutions.
Provision of the subsidy is truly a measure that benefits only the few—5 per cent. at most—at the expense of the majority. Why should taxpayers pay for relief that offers no clear benefits? The Government have therefore decided to use the money saved from abolition of the relief to help pay to cut VAT on fuel to 5 per cent., thereby particularly benefiting low-income households and pensioners.
It is truly breathtaking for the Conservative party, after 18 years of undermining the national health service, to try to portray itself as the pensioner's friend, worrying about the NHS while painting a bleak picture of it.

Mr. Desmond Swayne: The parliamentary newsletter of the Association of British Insurers states:
Although presented as helping to pay for the cost of reducing VAT on heating, the Association's submission to the Chancellor indicated that it will cost the Government more in terms of extra NHS costs and loss of insurance premium tax than it will save on the relief itself.
Will the Minister comment on that?

Dawn Primarolo: I am so glad that the hon. Gentleman has managed to have an original thought, although it has been supplied by someone outside the Chamber. I will, however, deal with precisely that point.
There is no indication that those who have private medical insurance and receive relief will change their minds because of our decision. In the name of fairness, however, the Government have made specific provisions in the clause to ensure that relief is not ended immediately, but honoured to the end of the annual contract. Such provision will give individuals who are concerned about their private medical insurance time to seek advice from their insurers and examine the options available.
I will deal with the options that insurance providers say are available after I allow the hon. Member for Grantham and Stamford (Mr. Davies) to intervene. Perhaps he can tell us whether it is right that people should be subsidised to do something that they would have done anyway.

Mr. Quentin Davies: The Minister just said that there is no indication that relief withdrawal will reduce the number of people who qualify on age grounds taking out private health insurance. That proposition is extraordinary, and essentially amounts to saying that one can increase the price of something—the net price to individuals taking such insurance cover will increase substantially after abolition of tax relief—without reducing demand for it. Surely that proposition is fundamentally implausible, and cannot possibly be true in the health care or any other sector.

Dawn Primarolo: What do the insurance companies say about the point raised by the hon. Gentleman? In The Times of 3 July 1997, in an advertisement headed "If you think private healthcare will be too expensive without tax relief, consult a specialist", Norwich Union—one of the largest providers of such insurance packages—stated:
If you're over 60, you've probably benefited from tax relief on your healthcare premiums. That changed after yesterday's Budget and you'll soon start paying up to 30 per cent. more. But to find out how you won't have to, no matter who your policy's with, call the Norwich Union Healthcare Tax Relief Helpline now.
Norwich Union will ensure that people can continue their policies without extra cost. A report in The Independent states that Norwich Union, one of the largest providers of this type of insurance, is confident that 98 per cent. of customers need not pay any more and could keep their private medical insurance. Those are the facts.

Mr. Quentin Davies: rose—

Mr. Nick St. Aubyn: rose—

Dawn Primarolo: I am sure that the hon. Gentlemen, to whom I am not giving way, will be able to catch your eye, Mr. Lord, and make their own contributions.
These are the facts. The Government have outlined their case for abolition on the basis that the relief is not justified. It has not worked. There has been no substantial increase in the number of people with private medical insurance. The amendment is defective. There is no reason why the many taxpayers should continue to provide this massive subsidy for the few. I hope that the Committee will reject the amendment, and support the Government.

Dr. Vincent Cable: I support amendment No. 13. It echoes amendment No. 14, tabled

by my hon. Friends the Members for Gordon (Mr. Bruce) and for Kingston and Surbiton (Mr. Davey) and me, but in a rather different spirit.
It was clear from our interventions on Second Reading that we share the Government's philosophy in many respects. We believe that it is inequitable that a relatively well-off section of the community should be subsidised through tax relief. This tax relief was originally introduced by the previous Government for the wrong motive—to weaken the NHS. We therefore support the Government's broad policy position, which is why we supported the Government on Second Reading.
However, this is the Committee stage. It is an opportunity to review the proposals in more detail, and, echoing some of the points that have already been made, we seek a much more thorough analysis of the financial implications. There are people employed in the Treasury—econometricians labouring in the bowels of the Ministry—who could be asked to produce some useful figures with which we can work.
At the moment, there is a wide spread of estimates about what will happen. Within the insurance industry, for example, Western Provident commissioned a survey by Gallup, which showed that an increase of 50 per cent. in premiums would lose it about 70 per cent. of its subscribers. That is a very high price elasticity of demand. Indeed, it seems implausibly high.
At the other extreme, the Government are telling us that their proposals will have no impact. Somewhere between those two extremes almost certainly lies the truth. In his intervention, the hon. Member for Grantham and Stamford (Mr. Davies) captured very clearly where that truth might be.

Mr. Quentin Davies: One always tries to avoid technical terms in this place, but the hon. Gentleman mentioned price elasticity of demand. Underlying the Minister's presentation of the Government's case is the clear assumption that price elasticity of demand for health care insurance is precisely zero. Does the hon. Gentleman agree that that is fundamentally implausible? Can he think of any commodity on God's earth for which the price elasticity of demand is literally zero, because it is only in that context that the hon. Lady's remarks make any sense?

Dr. Cable: The hon. Gentleman is right; I can think of no such commodity. The logic of the Budget suggests that the Government believe that behaviour can be changed through taxes and tax incentives. The purpose of increasing petrol taxes was to discourage motoring; the purpose of increasing excise duties on cigarettes was to discourage smoking; and the purpose of reducing MIRAS was to dampen the demand for housing. We know from experience that any impact is likely to be relatively small, but not zero. That is the point of my contribution.
In the absence of any sensible estimates, we have to work with the rough arithmetic we have been given. My understanding is that the cost to the Treasury of this tax relief is about £120 million to £140 million. I also believe that the total annual pay-out for medical insurance is about £400 million, so it would require only a quarter of the insurers to drop out of the scheme to eliminate completely the gain to the Treasury from the abolition of relief.
We have to put that in the context of the overall health service budget. The Liberal Democrats have been labouring to bring to the Government's attention the marginal position of the health service budget. On the basis of estimates produced by the Library, we believe that increased inflation will cut the health service budget in real terms by £400 million this year. After the additional injection of cash, the budget may be increased by about £420 million next year.
That means virtually no increase in health service provision over two years. Any loss from this relatively small measure will mean a reduction in per capita spending in the health service. That is why we support the amendment, and are pressing the Government for a more thorough analysis of the economic impact of their proposal.

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Mr. Ross Cranston: I start with a digression. The hon. Member for Daventry (Mr. Boswell) referred to my contribution yesterday. When winding up last night, he quoted Shakespeare. I should have thought that a close study of Shakespeare would have given him an appreciation of the use of irony, but apparently not.
The hon. Gentleman also does not seem to appreciate the impact of the defeat that his party suffered on 1 May. He has not realised that our victory was so massive because we appealed to the many rather than the few. The tax relief that we are talking about benefits very few—little more than 500,000 individuals. Only the relatively affluent can take out private medical insurance. The hon. Gentleman quoted a premium of £133 a month. Most people over 60 in my constituency cannot afford £133 a month.
A great deal has been made of the possible impact of the measure on the national health service. The Conservative amendment would defer the removal of the relief until the impact on the NHS has been assessed. There can be some speculation about the possible impact of the measure. There seems to be a price inelasticity. Many of those who are already taking out private medical insurance will continue to do so. I think that the hon. Member for Grantham and Stamford (Mr. Davies) finally grasped that a moment ago.
The insurers have made various assessments of the impact on the NHS. PPP suggested that the measure would increase NHS waiting lists by more than 100,000. Western Provident said that the added cost to the NHS would be as high as £300 million. BUPA has given a different estimate. If the insurers are unclear about the impact, I suggest that we should not postpone the measure for an assessment that will not be clear for a number of years.
I was taken by the remarks of Mr. William Laing, a leading analyst in the area. He was quoted in the Financial Times as saying:
the amount of a typical PMI premium is far higher than the cost to the NHS of the treatment covered.
He went on:
Taken together, this means the tax relief was ridiculous and could not possibly be justified in terms of savings to the NHS".

Mr. Swayne: Does the hon. Gentleman agree that the most important testament is that of the voters? [Laughter.]

May I therefore ask him whether he shared his enthusiasm for doing away with the tax relief with his voters in his election address, or whether he kept it from them, much as he did with his enthusiasm for doing away with mortgage tax relief?

Mr. Cranston: The hon. Gentleman does not seem to listen, quite apart from his inability to appreciate irony.
The hon. Member for Daventry made certain remarks about the aging population and the increasing demand on the health service that it would impose in coming years. There is certainly an element of truth in that.
The important reason why the Government have taken this measure is that it frees up money for other steps which will have an immediate impact on helping the elderly—especially, as my hon. Friend the Financial Secretary to the Treasury said, the reduction of VAT on fuel. On Second Reading, I gave some figures of the extent of fuel poverty. It is a serious problem, which causes very serious health problems among the elderly, and the Government have taken an immediate step on it.
In addition, as my hon. Friend the Financial Secretary to the Treasury said, this tax relief measure has been ineffective. It began in 1990. At that time, about 500,000 individuals took out private medical insurance. One estimate I have seen is that, in 1995, only 550,000 people took out private medical insurance; so there is little evidence that that relief has led to any significant increase in the purchase of private medical insurance.
Indeed, Mr. William Waldegrave, who is no longer in the House, following the voters" decision on 1 May—to take up a point raised earlier—argued at one point for the abolition of medical insurance premiums relief. He said that it had not increased take-up of private medical policies, and was expensive to administer. Conservative Members would benefit from sometimes taking into account what some of their former colleagues have said.
The expense of the measure has been referred to. According to the Red Book, it has cost about £560 million since its introduction in 1990. That is very significant. One reason why the cost has gone up is that insurance premiums for the elderly have gone up at three times the rate of those for everyone else. The removal of such an expensive measure will free up funds which, as I said, will more immediately benefit the elderly.
I oppose the amendment, and support the budgetary measure.

Mr. St. Aubyn: I welcome the comments by my hon. Friend the Member for Daventry (Mr. Boswell), because some of the points he raised—I hope the Financial Secretary will take them on board—will have a direct impact on Prime Health, a major health insurance firm based in Guildford, and on many elderly people in my constituency.
I estimate that more than 5,000 elderly people in the Guildford constituency currently enjoy the benefit of the tax relief. In the light of what the Financial Secretary said this afternoon, I am concerned that if—or rather when, for I fear it will happen—some of those 5,000 people cancel their health insurance policies, because the removal of the relief has increased the costs so much, they will at some point make a claim on our local health service. When that happens, the many will suffer as a result, not just the few. Everyone who wants to use the health service at the Royal Surrey hospital in Guildford will suffer.
It should be understood that one of the reasons for delaying the implementation of the clause is that private health insurance benefits the whole community, not just those who take it out. It benefits the whole community, because it relieves the national health service of costs that it would otherwise have to meet.

Kali Mountford: What is your evidence for suggesting that all private medical insurance holders would be forced to use the national health service? I have had only one person in my constituency complain about the measure, on general grounds. What is your evidence to the contrary?

Mr. St. Aubyn: I assure the hon. Lady that I have considerable evidence to the contrary. I have received almost as many letters on this subject as on any other that has arisen in the past few months.
Many of those who have written to me have said that they fear that they will have to stop receiving the benefit of private health insurance. They will have to rely on the local health service, and, as a result, they will impose a burden on it that all will have to share, if the speculative savings from abolishing the tax relief are to be diverted into changing the rate of VAT on fuel. It is obvious that those parts of the country with the most people having health insurance will have the most cancellations. The damaging results of the measure will hit all the people in such areas, including my constituency.
The Secretary of State for Health said earlier today—I wrote down his words as he said them—that, if there is a harsh winter this year, he will take responsibility. I will remind him of those words this winter when people who have had private health insurance in my constituency can no longer afford it.
My hon. Friend the Member for Daventry raised three specific consequences of the measure, which his amendment would mitigate while the Government worked out the damaging results of rushing the measure through the House. Representatives of Prime Health in my constituency spoke to me at some length about the three points on Friday.
The provision on verbal contracts will affect the firm specifically. People live busy lives and like to conduct business on the telephone—I do not mean hard-pressure telephone selling, but straightforward, modern business conducted on the telephone. Prime Health has entered contracts with its customers, and it is concerned that those contracts that predate the 2 July cut-off date will not be covered by the transitional provisions in clause 17. I would welcome an assurance from the Financial Secretary that verbal contracts will be covered in the transitional arrangements.
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It is normal for annual policies to be renewed about a month ahead of the renewal date. By the cut-off point of 2 July, a month's worth of renewals had been contracted for between health insurers and their customers. By changing the rules and imposing a guillotine on the tax benefit, the Government will change those contracts after the event.
I ask the Minister to consider applying the old rules to such contracts, just as we apply the old rules and rates to property contracts that have been exchanged but not completed. That would be consistent with the conduct of the previous Government, and it should be the approach of this Government. If contracts have been exchanged, but the start date has not yet been reached, the provisional arrangements should allow for that situation. The wording of clause 17 is not clear, and I should be grateful if the Minister could clarify the point.
As my hon. Friend the Member for Daventry pointed out, more than half the business of some private health insurers will be affected if monthly contracts are not taken into account. Monthly contracts are a form of payment for health insurance over a year, and they have been specially approved by the Inland Revenue. Had the Government taken more time over the introduction of the measure, they could have spoken to the Inland Revenue and found out more about the situation before they made speculative and highly optimistic assumptions about the effects of the clause.
It is essential, in the interests of the Government's objectives, that monthly contracts fall within the transitional arrangements. If all the monthly contracts are denied relief from the end of this month, all the customers with such contracts will require consultations at once, instead of over the year as their contracts come up for renewal and the ending of the tax relief hits them. It is unrealistic to expect even Norwich Union, let alone any of the other insurers, to cope with half their customers at once calling to ask about less expensive insurance.
We can predict the consequences. Many of those people, because they will not receive adequate counselling, will take the only decision they can afford, and cancel their insurance contracts. As a result, the savings on which the Government's arguments are based will disappear in additional costs to the national health service.
The Financial Secretary has already pointed out that the measure will make a 25 per cent. saving. Only one in four of those currently enjoying the benefit of private health insurance will have to cancel for the Financial Secretary's entire calculations to be thrown out of the window.
We know that health insurance costs for the elderly have gone up by much more than inflation.

Mr. Derek Twigg: Does the hon. Gentleman recall a report in the Financial Times on 24 April 1997 that the chief executive of Western Provident Association, Julius Stainton, had told a recent conference that insurers had only themselves to blame for the Labour party's plans for abolition, as many had used the introduction of the tax relief as a cover for a sharp increase in premiums for the elderly.

Mr. St. Aubyn: The hon. Gentleman makes an interesting point. There is always a risk that a tax relief will be misused in some way. If that is the case, the Government should phase out the relief step by step over a number of years, and see what consequences that might have for the numbers involved.

Mr. Twigg: rose—

Mr. St. Aubyn: Let me answer the question.
I understand from the industry that the real reason why costs have gone up is that, as private health insurance has become more popular, the industry has no longer been able to subsidise the cost of elderly patients by charging more than can be justified in commercial terms to younger patients.

Mr. Boswell: Does my hon. Friend agree that the costs in the national health service for provision for elderly patients have also risen sharply? To my recollection, when the age of 75 is reached, the annual cost to the public purse is about £1,300. It is not surprising that private medical insurance costs should have risen commensurately.

Mr. St. Aubyn: My hon. Friend makes a good point. Over the past seven years, many of those costs have risen. In a commercial world, the increase in the cost of health insurance for the elderly primarily reflects market forces, not any effect of the tax relief. Despite the increased cost, the number of elderly taking advantage of health insurance has risen. Without the relief, the number would have fallen, and the costs to the health service would have been very much higher.

Mr. Twigg: You cannot have it both ways. You said that, in that case, the Government should phase out the tax relief. Now you say that you agree that it should be phased out.

Mr. St. Aubyn: It would be extremely unwise to phase out the tax relief at all, but you would be much wiser to phase it out over a number of years than to cancel it halfway through this year. That is the point that I was making.
My general point is that the rush with which the change is being introduced shows a greed on the part of the Treasury for which all patients—those who are well off and those who are not—will suffer. More people will make demands on the health service, and that demand has not been budgeted for this year or beyond. We will all suffer as a result. The proposal is damaging to the many, not just the few.

Liz Blackman: I begin by saying to Conservative Members that I am staggered that you have come to the House to talk about a relief that you implemented in 1990—

The Second Deputy Chairman of Ways and Means (Mr. Michael Lord): Order. Several hon. Members keep using the word "you". Will they please try to remember not to do that when they make their speeches? I know that it is difficult to do, and that everyone is new to it, but it helps enormously if I do not have to keep getting to my feet to interrupt hon. Members.

Liz Blackman: I apologise, Mr. Lord. I am staggered that Conservative Members who implemented the relief in 1990 and have had seven years to operate it should come with so little evidence and ask Labour Members to evaluate their measure. I want Conservative Members to reflect on that. Was no evaluation undertaken during that time? It seems incredible that the effect of the relief has not been analysed.
One of the factors that distinguish the Labour Government from the previous Government is their attitude to taxation—the way that we raise revenue to fund policy and to service debt. In that respect, we inherited a considerable legacy.
Taxation strategies are not neutral. Behind them are values and priorities of a particular political complexion. What is taxed, and how, reveals a Government's priorities. Whacking tax or VAT on fuel reflects a different set of values from those that underlie the proposal to remove the tax relief on medical insurance premiums.
It is essential that the principles are clearly spelled out, to give people a yardstick by which to judge us. Labour has made no bones about the principles that should underpin the taxation system that we impose. We aim to promote work, to encourage savings, to encourage investment and to demonstrate an element of fairness. Those are the principles by which we will be judged.
By fairness, we mean a broad-based system, under which no sector of the population is unfairly burdened or has an unfair advantage, and where taxation serves the majority, not the minority, and specifically avoids punishing the less well-off. The tax relief that we are discussing fails all those tests. It does not serve the majority. It gives an unfair advantage to the few. It falls unduly on the less well-off as taxpayers.
The Government are committed to the NHS, to which all taxpayers contribute and which is open to all. We showed that commitment in the Budget. The private health sector is part of the market economy. That is accepted by the Government. The market economy, in the private health sector, offers choice to a small number of people. What is desperately unfair is the expectation that the majority of taxpayers should fund that personal choice. It is a subsidy. I hope that I can use the word "you" in this context. The adage, "You pays your money and you takes your choice" is applicable.
It is interesting to note that the assisted places scheme is a similarly unfair tax. The same logic has applied to the abolition of that scheme.
The substantial funds would be far better used to reduce the VAT on fuel, as has been mentioned. That would have significant benefits for many people in this society, especially those on limited incomes. That is just.
By their own standards, the previous Government did not achieve what they had intended from the measure, which was to increase the uptake of private medical insurance. The Conservatives have no statistics of their own to demonstrate its impact. They failed by their own criteria, but, above all, they failed the test of fairness, which, under a Labour Government, is a significant test. That is why the relief will be abolished.

Mr. Nick Gibb: This clause, and clause 19, which we shall debate later, make the Budget one that hurts pensioners. Pensioners suffer from an 11 per cent. devaluation of their pension funds from the ACT changes, and they suffer from the vindictive and envy-motivated decision to abolish tax relief on medical insurance for the over-60s.
The relief was introduced by the then Chancellor, Nigel Lawson, in his 1989 Budget as a way of encouraging people to take out or to keep on their private medical insurance in retirement. That, in turn, would help to relieve some of the burden on the NHS.
It is an entirely sensible policy to encourage people who can afford it, or who could afford it with a small tax incentive, to make their own provision for health care. It is especially sensible if it can be demonstrated, as I shall seek to do, that the cost of the tax relief is less than the savings that the NHS makes when the patients are treated at their own expense.
The Labour party seems to think that, if the articulate middle-class pensioners are "creamed off" by the private sector and are therefore no longer dependent on the NHS, the NHS itself will suffer because fewer people using it will be demanding a good service. The argument is that, if 600,000 articulate people stop using the NHS, it will cease to provide first-class clinical services. That is utter nonsense. It is the same argument that the Labour party uses against private education, and the Labour party is simply wrong.
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The existence of a strong private sector in both health and education provides a gold standard against which the state sector can compare itself and towards which it can seek to improve. Of course, that assumes that the private sector will provide a better service, which the Labour party does not necessarily accept.
Here we see the root of Labour's plan to abolish tax relief on private medical insurance—the old Labour insecurity about the private sector, old Labour's drive towards homogeneity and lack of choice. Thanks to 18 years of a Conservative Government who believed in free enterprise and choice, 5.7 million people now have private medical insurance—about 10 per cent. of the population.
As Labour Members have said, only about 5 per cent. of people over 60 have medical insurance—a proportion significantly lower than that in the population in general. The tax relief was introduced to encourage take-up in that section of the population. Although the Labour party claims that the introduction of the tax relief has not increased take-up among the over-60s, the facts state otherwise.
In 1989, there were about 400,000 individuals over 60 with private medical insurance. Today, there are 600,000. There are our statistics. That amounts to a 50 per cent. increase while the tax relief was being given. It is an especially high increase given that, in the same period—between 1990 and 1997—the total number of individuals covered by medical insurance dropped by 7 per cent. in the early 1990s and rose over the following seven years to broadly the 1990 level.
In other words, there was no overall increase in the number of people covered by medical insurance between 1990 and 1997, yet there was a 50 per cent. increase in the number of people over 60 who were covered. The over-60s now account for one third of all individuals with medical insurance, compared with only one quarter when the relief was introduced.
We should not be hearing Ministers and other Labour Members claiming that the tax relief had no effect on the numbers taking out private medical insurance. The facts state otherwise, and those who say that there has been no effect are simply wrong.
I shall now say something about the cost of abolition. The Red Book shows that the gross savings from the abolition of the tax relief would be £115 million in 1998–99 and £135 million in 1999–2000. The relief equates to more than £500 million of gross premiums.
According to the Association of British Insurers, the overall claims ratio for that age group—the cost of claims expressed as a percentage of premiums—is about 80 per cent. That means that £500 million in gross premiums represents £400 million—worth of medical treatment. The insurance industry has estimated that abolition of relief, which will increase premiums by about £25 a month, will result in one third of the over-60s with insurance terminating their policies and becoming reliant on the NHS. That corresponds to £133 million—worth of extra medical care, which the NHS will have to find as a result of the abolition of the relief. That compares with a saving of only £115 million.
It is absurd for the Financial Secretary to the Treasury to dispute those figures on the basis of a marketing advertisement in The Times. I hope the Government are basing their statistical analysis on more than that. Their figures do not add up.
There is worse. As my hon. Friend the Member for Eastbourne (Mr. Waterson) pointed out in an Adjournment debate on 16 June, there will be a domino effect if 200,000 people cancel their policies. As the number of private medical insurance policyholders decreases, an additional burden will fall on those who remain. That means higher premiums for them. Thus, more people will be priced out of insurance and become reliant on the NHS.
When one considers that the types of medical treatment most likely to be required under the private insurance contracts are hip replacements, cataract removals and knee joint replacements—operations which are already stretching the NHS to breaking point—one realises how absurdly the Government are acting in abolishing the relief. People who need hip replacements and new knee joints suffer much discomfort and pain, and the Government's policy will mean longer waiting lists for those procedures in the NHS. That shows how mean-spirited is the Government's abolition of the relief.
I have received many letters from retired people in Bognor Regis and Littlehampton asking me to urge the Government not to abolish that much needed and sensible tax relief. On their behalf, I urge the Government to drop their proposal, and I urge right hon. and hon. Members on both sides of the Committee to vote for the amendment and against clause 17.

Jacqui Smith: I oppose the amendment because it is designed to put off the implementation of an important measure in our Budget. I cannot understand why Conservative Members are so keen to keep a measure which clearly has not worked, even in their own terms. It has fulfilled neither the Opposition's aims nor ours.
Let us talk about the Opposition's aims first. The hon. Member for Daventry (Mr. Boswell) has used similar arguments to those used yesterday, when the Opposition said that mortgage interest relief at source promoted home ownership. I disagreed with him at the time.
Today, the argument is that we should keep private medical insurance because it promotes the practice of older people taking out private insurance—

Mr. Boswell: The hon. Lady said that she disagreed with the proposition that MIRAS promoted home ownership. Does she therefore feel that it should be abolished altogether?

Jacqui Smith: My argument yesterday was that the decision in the Budget on MIRAS was right, because MIRAS does not promote home ownership, and that the money saved by the Government's current proposal on MIRAS could be put to better uses.
The Conservatives" argument presumably is that the tax relief promotes the take-up of private medical insurance by older people. Incidentally, it seems strange to argue that the only way to save the NHS is by persuading as many people as possible not to use it. That says something about Conservative Members' attitude to our national health service, which Labour Members believe should be available to everyone who needs it.
Private medical insurance relief has not achieved what the Opposition want it to achieve. Despite the fact that it has cost £560 million since April 1990, there is little, if any, evidence of an increase in take-up of private medical insurance among the over-60s. In fact, I would argue that those receiving it would have taken out private medical insurance in any case. That seems to be the suggestion from the fact that when an extra incentive is given people in large numbers do not take out more insurance. There is no reason to believe that scrapping the relief will cause a flood of elderly people returning to the NHS. The amendment does not stand up.
The relief has failed even in Conservative terms—the previous Government recognised that when they reduced it at the higher level—and it certainly does not achieve what the Government want. It subsidises the few who can already afford private health insurance.
I am sure that all hon. Members were interested to hear about the mother of the hon. Member for Daventry; I am extremely pleased that she can afford private health care. My mother is not yet 60, so she would not have qualified for the relief in any case, but my dad is; he does not have private medical insurance, but, through his taxes, he subsidises that of the hon. Gentleman's mother. I have no animosity towards her, but I feel that it is slightly unfair that my dad should have to subsidise her private choice through taxation.

Mr. Boswell: As the hon. Lady has been kind enough to refer to my mother, does she recognise the inequity of the position whereby my mother's private health tax relief will be withdrawn to support my expenditure on heating oil in a somewhat larger house than hers?

Jacqui Smith: It may be my fault, but I do not quite follow the logic of that. My argument about inequity was that, at the moment, the taxpayer is subsidising private choices.
The relief shows the same defeatist attitude towards public service that my hon. Friend the Member for Erewash (Liz Blackman) pointed out in the case of the previous Government's attitude to the assisted places scheme. Have our public services really got to the state where, to keep

them going, we need to bribe people with taxpayers' money not to use them? Conservative Members clearly think that we have to bribe people out of the state education system and the national health service.
If that is so, it is because of the effect of 18 years of Conservative government on our schools and hospitals. We should not accept that as a fait accompli: we should consider ways of improving those facilities so that we no longer have to ask taxpayers to fund people opting out of public services.
Unlike the hon. Members for Guildford (Mr. St. Aubyn) and for Bognor Regis and Littlehampton (Mr. Gibb), I do not have people queuing up at my surgery and begging me to maintain the tax relief. I met an elderly man last week who had already waited 18 months for a knee operation and did not have private health insurance.

Mr. Swayne: Will the gentleman's condition be assisted by additions to the queue owing to people having to give up their private health insurance?

Jacqui Smith: There is no evidence that the relief has increased the number of people taking out private medical insurance, and I therefore believe that there is no reason to suppose that its removal will cause people to flood back into the NHS.

Mr. Gibb: The hon. Lady cannot have been listening when I pointed out that, in 1990, there were 400,000 people over the age of 60 with private medical insurance and that, by 1996, the number had increased to 600,000. Those are the statistics that are needed. Why was not the hon. Lady listening?

Jacqui Smith: If the relief was so effective, why did the previous Government lose faith in it and take it away at the higher rate?
Older people who come to see me say not that they want the tax relief to be maintained but that the health service should be able to deal with their needs as they arise. Most of those people are not in the fortunate position of so many people in the constituency of the hon. Member for Guildford and cannot afford private medical insurance, even with the relief that was previously offered, and they understand that in an emergency they will be protected not by private health care schemes but by a properly supported national health service.
It is depressing for Labour Members to see the crocodile tears shed by the hon. Members for Daventry and for Guildford on the subject of health care for the elderly. Yes, those older people have contributed throughout their lives: they have done so through taxation and national insurance, to ensure that they have a health service that looks after them properly in their old age. That is why I welcome my right hon. Friend the Chancellor's announcement of an extra £1.2 billion for health care.
The Budget clearly shows the different priorities of the Government and the Opposition. What does the amendment say about the Opposition's priorities, and what does the proposal to remove private medical insurance relief say about ours? It shows that we are honouring the pledge made in our manifesto—and in my election literature—that our taxation system would be fair.
Conservative Members suggested yesterday that, somehow or other, they lost the general election because the public had misunderstood our tax plans. I believe that it was because the Conservatives patronised people, as they did yesterday, and people felt betrayed and wanted a Government who were fair about taxation. People contrasted our promises on tax—to be fair, and to encourage work, saving and investment—with Conservative proposals and betrayals, and knew that we would spend their money wisely.
The Chancellor reiterated in the Budget what the money saved from scrapping the relief would be spent on. He said:
The principle of fairness in taxation will guide all my Budget decisions."—[Official Report, 2 July 1997; Vol. 297, c. 312.]
That is why the £120 million saved in 1997–98 and the £140 million saved in 1999–2000 on the failed relief for private medical insurance will contribute to cutting value added tax on fuel—another important pledge in our manifesto.
As I suggested, that shows the clear distinction between our taxation values and those of the Opposition. While they are happy to maintain an expensive and ineffective relief on private medical insurance, we want to use that money to cut value added tax on fuel—the most unfair and regressive tax introduced by the previous Government.
In case some Opposition Members are keen to jump up with the environmental justifications, which was, perhaps, what the hon. Member for Daventry was referring to earlier—although, there is a certain irony in Opposition Members claiming those green credentials and I am not sure which Opposition Member believes that he is Swampy—there are many other ways in which the taxation system should be used to achieve environmental aims. Value added tax on fuel was one tax which gave green taxation a bad name.
The choice represented by the amendment is clear—the deferral of the positive proposal to get rid of private medical insurance and use the money to cut the unfair and regressive VAT on domestic fuel or the maintenance of private medical insurance, which is ineffective and benefits only a few people. For that reason, I oppose the amendment.

Mr. Swayne: The Treasury team has shown a remarkable assurance about the estimate for the consequences of this measure. Indeed, the Financial Secretary to the Treasury said that she thought that the demand for private medical assurance was perfectly inelastic. That assurance is misplaced. At the beginning of the week, on Monday, the Association of British Insurers wrote to me saying:
The Association remains concerned that the Bill seeks to implement policy decisions with very complex implications with no prior consultation and allowing for only a very limited period of consideration of the Bill by Parliament. This could lead to measures proving unsatisfactory and needing amendment in a subsequent Finance Act.
My experience is that, far from being inelastic, the demand is—

Mr. Derek Twigg: On that point, an article in the Financial Times stated:
PMI market analysts Laing and Buisson said that it believed these estimates were all incorrect. "To date the market for PMI has been price inelastic; increases in price have not been met by

proportionate big drops in demand. Coupled with that, the amount of a typical PMI premium is far higher than the cost to the NHS of the treatment covered. Taken together, this means the tax relief was ridiculous and could not possibly be justified in terms of the savings to the NHS" said director Mr. William Laing".
Mr. Laing makes a completely different point from that made by the hon. Gentleman on the elasticity of the market.

Mr. Swayne: I am not sure what the question was, but I will have a stab at answering it. It is very much the answer that I gave to another hon. Gentleman who has since departed from the Chamber. The best estimate of the elasticity of demand comes not from City scribblers, but from the voters. I represent a constituency with three hunts and yet, given my mailbag during the election campaign—

Mr. Jim Murphy: On a point of order, Mr. Martin. I understood that we were discussing amendments to the Finance Bill and not fox hunting. I would ask the hon. Member for New Forest, West (Mr. Swayne) to concentrate on the matter at hand.

The First Deputy Chairman of Ways and Means (Mr. Michael J. Martin): I am sure that the hon. Member for New Forest, West (Mr. Swayne) will get to the amendment in due course.

Mr. Swayne: I was trying to give some indication of the strength of feeling among my constituents. My mailbag on this measure has been greater than that I have received on hunting, which has been considerable. That is not surprising, since I represent those well-known retirement areas of Milford on Sea, Barton on Sea and New Milton.
That brings me to the nub of this mean-minded measure. What is extraordinary about it is the lack of consideration for elderly people and the retired. People who have retired are not as capable as those youthful Labour Members of adjusting their financial decisions relatively quickly. The elderly make long-term financial plans and commitments. The rug is being pulled from under the assumptions that they have made and the plans that they laid on retirement and beyond. It is a disgraceful and mean-minded measure. I support the amendment.

Kali Mountford: I cannot help but think of the many postbags that we have already discussed today. I must mention my postbag of one letter in support of the measures that the Opposition are discussing and the huge postbag and the many phone calls that I have received from elderly constituents, young constituents and people in poverty and difficulty—people who told me before the election, "If you don't do something about fuel costs, we'll never vote for you again." Is that not the nub of the matter?
Was it not absolutely right for my hon. Friend the Member for Erewash (Liz Blackman), in an outstanding speech, to point out the benefits of a taxation system being put together with social policy, which indicates the policies of the Government of the day? If ever a measure was more heralded than this Budget, I should like to know what it was. Opposition Members seem to suggest that my constituents had no knowledge of what was to be put before them. They know about it now, but I have still had only one letter in support of the measures that the Opposition are discussing.
Where are the measures? The hon. Member for Guildford (Mr. St. Aubyn) is not in his seat. He seemed to suggest that Opposition Members could have tabled amendments on phasing out the proposal on the relief on medical insurance for people over 60, but no such amendment has been tabled.

Mr. Boswell: Far be it from me to speak on behalf of my hon. Friend, but the timetable imposed under guillotine by the Government and the consideration of this Bill at such short notice after Second Reading, followed by a Committee stage on successive days, imposed severe strains both on practitioners who wanted to submit amendments for our consideration and on our being able to process and table amendments and have them considered. I have put the points to the Financial Secretary, and I am sure that she will do her best to answer them.

Kali Mountford: I am interested in that contribution, but the hon. Member for Guildford clearly had some measures in mind. Since our measures were well heralded long before the election—far earlier this year—they are no surprise to anyone. I should have expected the Opposition to be prepared if they felt the matter was so important.

Mr. Boswell: Were the measures in the hon. Lady's election manifesto?

Kali Mountford: Yes, they were. I will indulge the hon. Gentleman. I spoke in person to more than 1,000 people in my constituency on that very matter and, in particular, on VAT on fuel. I do not think that any of my constituents will have found the measure a surprise. Indeed, it is typical of this Government and my party to consult widely when any measure is introduced, so I do not need to go further on that point.

Mr. Peter Brooke: Will the hon. Lady give way?

Kali Mountford: I will be indulgent.

Mr. Brooke: I am grateful to the hon. Lady for her indulgence. How much consultation has taken place on advance corporation tax?

Kali Mountford: I am interested that you want to broaden the debate.

The First Deputy Chairman: Order. The right hon. Member for Cities of London and Westminster (Mr. Brooke) may want to broaden the debate, but I do not.

Kali Mountford: I concur completely with your wisdom, Mr. Martin.
I shall share a short story with the Committee. I visited two of my constituents in January on an entirely different matter. These people had worked hard throughout their lives and had made savings, but they were having some difficulties. They showed me into their best room because they wanted to show themselves at their very best, and certainly provide me with a cup of tea. I became blue with cold in that room because they could not afford to put on their heating.
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Some while ago, I remembered a Conservative Member who used to represent Derbyshire, South advising people such as the two constituents to whom I have referred that they would do well to wear hats and silk underwear to keep warm. That was said at about the time when value added tax on fuel was introduced. That piece of advice has not benefited my constituents, but they will benefit from the ability to pay the fuel bills that are now causing them so many problems.
Conservative Members ask why a review has not taken place. At the same time, they do not support the reviews that we are conducting. Conservative Governments did not conduct a review and we have decided to repeal tax relief for medical insurance. We are following the trend set by the previous Government in relinquishing the higher tax benefit, so there is nothing new in our approach.
We are a Government who follow common sense. Surely it is common sense to say that we shall do what we promised before the general election, at the same time taking into account factors that the Conservative Government seem not to have considered. The cold temperatures in which my constituents live contribute to their illhealth, and that illhealth is a cost to the nation through the national health service. Many medical reports set out the consequences of cold weather, leading to the illhealth of the elderly and the very young, whom I care about deeply.
As I said, I have received one letter in support of retaining private medical insurance tax relief. That constituent did not state that he would be part of a great haemorrhage from private medical insurance schemes—indeed, quite the opposite.
We are saying that we shall fulfil our election promises in a thoughtful way. We shall give people time to take proper decisions for themselves. They will be able to make choices for themselves. The greatest benefit will go to those people who do not have a choice, such as the two constituents to whom I have referred.
The Government are saying, as I have always said, that there must be fairness in taxation. We must have an equitable taxation system and an egalitarian society that ensures that those in most need will receive benefit. Those who have the least needs should not receive benefits that they do not require.

Mr. Loughton: I cannot be alone in feeling that, whenever a Labour Member contributes to the debate, he or she succeeds only in tying the Government up in a knot. Earlier, the Financial Secretary accused me of some inconsistency. Perhaps she will consider the inconsistency that she introduced by claiming that there has not been a net increase in the numbers of pensioners taking advantage of tax relief on medical policies. If there has not been a large increase in those numbers over the past seven years, that suggests to me some contentment with the way in which the national health service has been run for most of the 18 years under a Conservative Administration.
Another inconsistency comes from those who suggest that the tax relief that the Government are seeking to claw back is worth more than the underlying treatment in the NHS for which patients will have to qualify. There is a


further absurd inconsistency when it is suggested that there is no price elasticity. When it comes to mortgage interest relief at source, however, there is elasticity, because the Government have been using it as a way of cooling down the property market. These arguments do not add up.
I should disclose an interest as someone who has enjoyed a corporate BUPA subscription for some years, although I have never taken advantage of it. For many years, however, I have had to pay tax on it as a benefit in kind, and have been happy to do so. That has provided additional funds that can be used for patients using the NHS, as my family and I have done frequently.
It has become a cri de coeur or soundbite of the Government that they are a Government of the many, not of the few. It is a cliché that we hear time and time again. But this mean-minded measure is entirely consistent with the abolition of the assisted places scheme. There is no firm evidence that it will produce financial savings. No consideration was given to the future education of those children who are now enjoying assisted places. The Government will proceed, however, because it is politically correct so to do.
We shall have the same ordeal with country sports, but in the meantime the Government have decided to attack those pensioners who chose to spend their money as they thought fit on taking out their own private medical insurance, and in doing so took some pressure off the NHS, which we are constantly reminded is under pressure. That pressure is not denied, and in my constituency it is a key issue.
Let us remember that between 40 and 50 per cent. of expenditure in the NHS is directed to pensioners, who constitute just 16 per cent. of the population. That is happening because pensioners are a claims-intensive part of the community when it comes to spending in the NHS. They require longer stays in hospital, understandably. With further medical advances being made all the time, the situation will be compounded.
Many figures have been cited in the debate, and I shall add to them by saying that more than 400,000 private medical insurance contracts for pensioners have been taken out, involving more than 600,000 individuals. Many of the contracts are taken out for families.

Dawn Primarolo: Does the hon. Gentleman accept that the Inland Revenue's figures show that there were 375,000 such contracts in 1996–97, 25,000 more than in 1990, covering a maximum of another 50,000 people?

Mr. Loughton: I shall not argue the toss between 375,000 and 400,000. I think that my point was well made. Different figures have been presented by different Labour Members. I shall use figures that come from BUPA, which is the largest provider of private medical health care insurance cover for pensioners. It takes account of about 48 per cent. of the market. BUPA estimates that the average cost to pensioners is just under £1,200 a year, which amounts to just under £300 a year in terms of tax relief. The figures are almost double for married couples.
These are not small sums. They apply to people who have saved for many years. We are talking of those—certainly this applies in my constituency—who have

cheaper premiums as elderly people because they were members of medical insurance schemes before they were pensioners, and have remained so all the way through. Now, all of a sudden, without so much as a by your leave, it is all to go. They will be faced with deciding—it will be a hard decision—whether they will be able to afford to keep their insurance. That is what we are talking about.

Kali Mountford: When some of my constituents suffer the degenerative illnesses to which we referred earlier and require a long stay in hospital, they often find that they are not covered by their private medical insurance. Have the hon. Gentleman's constituents had similar problems?

Mr. Loughton: Indeed, the hon. Lady makes a fair point. That is why in some insurance policies there is great leeway in the cover that one can purchase. That will not go away, regardless of how we pay for it. Those patients will have to be looked after at some stage, be it through private medical insurance and private health care or through the NHS. It makes no difference. If the hon. Lady is saying that there should be better regulation of the services provided under medical insurance cover, that is an entirely different point, and it is not proposed in the Budget. I shall return to my point and then deal with my constituency in particular.
BUPA has suggested a likely lapse rate of about 30 per cent., which would mean that 180,000 people would become reliant on the NHS. That probably translates to between 40,000 and 50,000 hospital episodes—when people have to go to hospital for treatment that they would previously have had under private medical insurance cover.
What will the impact be in my constituency? I said at the beginning that I should declare an interest. I should declare a further interest in that Worthing has the largest pensioner population in the country, and West Sussex has the highest density of pensioners with private medical insurance cover. The hon. Member for Colne Valley (Kali Mountford) may be interested to know that this measure impacts on my constituency one heck of a lot.
I do not want to trade numbers over mailbags, but this is a significant issue and it has come before me time and again, both before and after the election. I do not say that it has suddenly come out, but a very real fear has been put around. Perhaps that is why there was such a reduced swing against the Conservatives in my constituency—but I shall not press that point.
The people who have private medical insurance, particularly those in Worthing, are not rich. They are people who were previously on average earnings and are of average means. They live in modest bungalows, particularly those in parts of Worthing. In Worthing, more than 1,000 pensioners have private medical cover with BUPA. That is a lot of people, just in the borough of Worthing.
As my hon. Friend the Member for Bognor Regis and Littlehampton (Mr. Gibb)—just up the coast from me—said, cataract and hip replacement operations are some of the most frequent treatments required by pensioners. The waiting list for those operations has gone up to 18 months and is worsening. [HON. MEMBERS: "Whose fault is that?"] We looked in the Budget for the great panacea that we were promised for all the ills of the national health service, but any additional money, which in any case


works out less than the additional money that the Conservative Government added last year, will not come into effect until next year.
The Government have done nothing about the crisis that may afflict the people of Worthing and other high-density pensioner populations this winter. It is entirely in the Government's hands and remit to decide whether to act now.

Mr. Jim Murphy: Will the hon. Gentleman give way?

Mr. Loughton: I should like to continue my point. I have given way several times.
I should also mention that elderly people have the least time available to wait, yet they are denied the opportunity to speed up their treatment by using money from their own savings, and must queue up with everybody else for the national health service. That will not improve. We know the demography of the population. We know that it is an aging population. At the moment, there are about 3.2 working people for every pensioner. In 30 years' time, there will be about 2.5 working people for every pensioner. The problem is getting worse.
The irony is, as my hon. Friend the Member for Bognor Regis and Littlehampton said earlier, that there is no material gain to the Government or the Exchequer in this measure. The cost of the tax relief has been estimated in the Red Book at about £115 million, or £120 million, as my hon. Friend said.

Mr. Murphy: Will the hon. Gentleman give way?

Mr. Loughton: I will now.

Mr. Murphy: I understand that the hon. Gentleman has already declared a corporate interest in receiving the gift from BUPA for private medical insurance. Does he believe that it is correct, just and in the interests of the health service that the majority of pensioners in his constituency subsidise a very small minority who benefit from this relief? Indeed, does that not show that the Government are entirely right to remove it?

Mr. Loughton: The fact that the hon. Gentleman referred to corporate private health care as a gift underlines that he has got this thing entirely the wrong way up. It is not a gift; it is a condition of employment on which many people pay tax at the marginal rate, as it is a benefit in kind, and contribute a great deal to the Exchequer. The hon. Gentleman is not taking account of the fact that people who enjoy private health care as a result of putting their own money into it are saving the national health service funds that it would have to devote to them were they solely dependent on the NHS.
That brings me back to the point I made right at the beginning—obviously the hon. Member for Eastwood (Mr. Murphy) was not listening. The tax relief does not outweigh the cost of the NHS treatment that it is there to cover. The sums do not add up.

Mr. Murphy: Will the hon. Gentleman give way?

Mr. Loughton: I have already given way. I am repeating the point that I made earlier.

Mr. Murphy: rose—

Mr. Loughton: I shall continue. No doubt the hon. Gentleman will want to come back for another stab at this later.
Not only is the cost to the NHS of extra patients likely to be in excess of £100 million, but those patients will add to the waiting list, so waiting times will be pushed up. There will be a further cost in the insurance premium tax, which is likely to lose just over £8 million to the Exchequer, and a further cost in the revenue through NHS pay beds, which will not now feed through from pensioners who use private health care insurance for their treatment—an estimated cost of up to another £20 million.
If all those figures are taken into account, certain people make a very credible case for how much the measure will cost the Exchequer, not only financially but in terms of the great misery that it will cause people who have saved hard and used their moneys as they saw fit: that rug has now been neatly pulled from beneath them. Yet Labour Members accuse Opposition Members of not making firm proposals. We have made some firm proposals, but Labour Members have ridden roughshod over suggestions to adapt the scheme. They have made no attempt to suggest how we might broaden the age band, if the Government are really determined to change the current tax relief. There has been no attempt to suggest that the tax relief rates should be reduced.

Mr. Murphy: Will the hon. Gentleman give way?

Mr. Loughton: I shall give the hon. Gentleman a chance.

Mr. Murphy: I thank the hon. Gentleman. I wish to raise a different point, as he has moved on. I understand that, in 1994, the previous Government brought about changes. Did the previous Government have consultations such as those identified in the amendments this evening, or did they simply ride roughshod over the opinion of the constituents whom the hon. Gentleman now represents? I would appreciate an answer.

Mr. Loughton: There is a considerable difference between adapting the rates of tax relief that are available—that has happened in many other contexts; we were talking about MIRAS yesterday—and, in one fell swoop, abandoning it altogether, with no prospect of its return under the present Government and no possibility of pensioners' being able to make up the amount from other sources. There is a heck of a lot of difference between a marginal change and abandoning tax relief altogether. I think that the hon. Gentleman knows that full well.

Mr. Murphy: Will the hon. Gentleman give way?

Mr. Loughton: May I continue?

The First Deputy Chairman: Order. The hon. Member for East Worthing and Shoreham (Mr. Loughton) is not going to give way.

Mr. Loughton: I detect in the hon. Member for Eastwood the qualities of a pretender to the throne of the architect of the endogenous growth theory, one Ed Balls. It seems that a missive has gone out from Mandelson


towers to the effect that Balls-speak—or should I say "speak Balls"—is now the order of the day as far as new Labour is concerned.

Mr. Murphy: Will the hon. Gentleman give way?

Mr. Loughton: I shall be delighted to give way to the hon. Gentleman if we are to hear yet another version of what I have just alluded to.

Mr. Murphy: I only rise to speak when the hon. Gentleman's comments bear some comparison with the name of the colleague of mine whom he mentioned earlier—Mr. Balls.

Mr. Loughton: I am afraid that I am entirely lost. I shall continue with my speech before the entire Committee goes to sleep.
The Government have made no attempt to broaden the age bands. They have made no attempt to come up with a compromise in the form of a reduction in tax relief rates; we did that. They have made no attempt to phase out the current arrangements gradually. People are being left in the lurch as the Government introduce this measure by means of one of their familiar guillotines.
There have been further inconsistencies. The Government are prepared to subsidise false jobs—jobs that will no doubt turn out to be short term and ineffective—through the windfall tax, but they are not prepared to give a tax subsidy to those who are happy to put up the money themselves and, indeed, do the NHS a service by making their own arrangements. The measure will only exacerbate the problems of the NHS, while depriving people of choice and undermining their self-reliance and independence.
This is a mean, dogmatic measure. It is another case of cutting off the nose to spite the politically correct face, and—as I said at the outset—a further onslaught on minority interests. I firmly support the amendment.

Charlotte Atkins: There are more than 15,000 pensioners in my constituency. That is a high proportion. I have had many meetings with those pensioners, and have received many letters from them; but only one couple have ever spoken or written to me about this issue.
What concerns pensioners in my constituency is having to eke out an existence on a pittance. A third of pensioners are on means-tested benefits: that is a legacy of the last Government. What concerns them is that the NHS should be there when they need it, but the last Government's market policies have helped to destroy the NHS. Pensioners also live in fear of losing their homes because they cannot meet the cost of their long-term care needs without giving up those homes.
Why is tax relief not the burning issue that Conservative Members suggest it is? Why is my postbag not bulging with letters? Why have I not been telephoned every day about this issue, both before and after the Budget? Is it because it was only relatively recently—in April 1990—that tax relief was given to both basic and higher-rate taxpayers? As some of my hon. Friends have pointed out, that did not last long: by April 1994, tax relief at the higher rate was withdrawn.
Does that constitute a ringing endorsement of the scheme by the former Government? I think not. Does it demonstrate serious reservations on their part? I think that it does. We are seeing crocodile tears.
Between 1990 and 1997, the number of contracts increased by only 25,000, from 350,000 to 375,000. The Financial Secretary gave those figures earlier. The number of people covered by the contracts increased by 50,000 at the most. That is an increase of just 10 per cent. The last Government stated that tax relief was intended to encourage the elderly to take up medical insurance, but the 10 per cent. increase signifies not success but failure in those terms.
The situation must be seen in the context of a national health service that was being run down—a national health service that was consumed by stories of agism featuring elderly people who could not get the operations that they needed, and were not considered worth treating. An atmosphere of fear was created. In such a climate, if the number of people covered by contracts increased by only 10 per cent., I do not think that that was down to tax relief. The fear that the NHS was incapable of providing care from the cradle to the grave became an increasing reality during the 18 years of Conservative rule—yet the figure increased by only 10 per cent.
That suggests that the cost of tax relief is largely dead weight, benefiting people who had already taken out medical insurance or who would have done so anyway, rather than those who were encouraged to do so by tax relief. I understand that the cost of the relief last year was £110 million, and that it will rise to £120 million in the next full financial year. That amount cannot be justified—as I have said, it is largely dead weight—when schools and the NHS are crying out for funds. If the elderly decide that they want to be treated privately, that is fine, but the state should not have to foot the bill.
I appreciate that, in opting out of the NHS, the elderly are exercising their right to choice, but many elderly people decide to go private. A number of hon. Members on both sides of the Committee have talked about their parents. I will talk about mine, and, in particular, about my mother. She paid for a hip replacement operation some three years ago. Because of the excruciating pain that she was experiencing, she managed to raise the money to go into a private hospital. She had to wait for well over a year, and, at the age of 81, faced the prospect of having to wait for a further two years. She therefore decided to raise the necessary funds as best she could, and to meet the bill herself.
My mother did not get any tax relief. She received no benefit from the state. She decided to pay the bill herself: that was her choice, and I applaud it. It was her decision, backed by her family. We could see that she was in pain, that she was confined to her home and that she could not enjoy life. She could not go out for the walks that she had enjoyed every day of her life, because she could not walk. She therefore decided to find the money for the operation, but there was no subsidy from the state. My mother had to make the choice between finding the money and suffering the pain, because the NHS had failed to provide the service that she needed.
No person, young or old, should have to make such a choice, but, unfortunately, 18 years of Tory government have forced people to make that choice. My mother was lucky—she was able to raise the money with the help


of her family—but, because of the parlous state of our national health service, she had to be treated privately. We should ensure that the state does not subsidise people who opt for private medical insurance. The money should be spent on the NHS, on schools and on services from which we know that everyone will benefit, not just on people who can afford to pay.

Mr. Peter Brooke: As you, Mr. Martin, have particular occasion to know, I sat here throughout the windfall tax debate yesterday hoping to speak on behalf of the City of London. I make no criticism of the fact that I was not called, and I know that you did your level best to ensure that I would be called. I mention it merely to make the point to new Members that one can just as easily be asked to sit through the whole of a debate and still fail to make a constituency speech when one has been in the House 20 years as after being here 20 days, 20 weeks or 20 months.
I apologise to my hon. Friend the Member for Daventry (Mr. Boswell) for not having been present when he opened the debate. I do not know whether he alluded to the fact that, like the MIRAS proposal, this measure was not in the Labour party manifesto. I am sure that it is pure coincidence that the measures directly relating to tax on individuals slipped out of the manifesto.
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I am over 60 and I do not have any private health insurance. I represent an inner-city seat, and it is a commonplace that such seats have a greater proportion of elderly people than do the generality of seats: that is certainly true of my constituency. The health service reforms were substantially directed to demography and to the growing numbers of the elderly. We have had a long debate in London on the availability and supply of hospital beds. Professor Jarman of St. Mary's hospital in my constituency has made a series of notable contributions to that debate, and I am delighted that he has been put on the Secretary of State's panel reviewing the position with regard to London hospitals.
You will rule me out of order, Mr. Martin, if I go on too long about long-term issues of the national health service in inner London. The resource allocation working party was established by a Labour Government, supported by the Liberal Democrats at the time of the Lib-Lab pact and endorsed by the Conservative Government in 1979. One of the consequences of RAWP was the serial closures of hospitals in London. There was bipartisan agreement for resources deliberately to be moved out of inner London to other sites across the country. Charing Cross and St. George's hospitals in my constituency had already been closed.

Dawn Primarolo: I agree with the right hon. Gentleman about Professor Jarman's contribution. The right hon. Gentleman also referred to RAWP and the health authority funding formula. Does he accept that the problem of draining money out of London resulted from the Tomlinson report, which was commissioned by the Conservative Government?

Mr. Brooke: I apologise to the Financial Secretary, but I do not agree with her. Westminster hospital in my constituency closed and moved its services to the new

Chelsea and Westminister hospital at the end of the 1980s. The decision to merge the Middlesex hospital with University College hospital was taken well before the Tomlinson report. The Tomlinson report was responsible for the closure of St. Bartholomew's, and I shall come to that in a moment. There is a separate point about NHS accounting, which causes people in inner cities to subsidise the rest of the country twice, but that is by the by.
We are already in difficulty, because 30,000 of the 300,000 people in the Bart's catchment area are seriously disadvantaged by the move. That area covers my constituency, the constituency of the Secretary of State for what I will now call the Department of Culture, Media and Sport and the constituency of the hon. Member for Hackney, South and Shoreditch (Mr. Sedgemore). Elderly people went to live in the Barbican because of the NHS services available there, so their anger at the closure of Bart's was understandable. I acknowledge that that decision was made by a Conservative Government, so their anger was partly vented on me. The problem has been exacerbated by the present unsatisfactory alternative arrangements.
I draw attention to the straitened circumstances of the NHS in London. I am joined in that by London Labour Members, who have applauded the review that the Secretary of State for Health is undertaking. London is not well placed to absorb further strains. The establishment of a panel has been welcomed, and I can remember debates before the election in which London Labour Members called for a moratorium on hospital closures and an end to the practice of withdrawing hospital beds from London.
I acknowledge my ignorance, because I do not know how many of my elderly constituents who have private medical insurance—obviously, there are some—will transfer out of their present arrangements as a result of the proposed tax change. I have an 80-year-old constituent whose gross premium for himself and his wife is £3,105.46, with tax relief of £714.21.
The Financial Secretary said that the cut in VAT on fuel would benefit pensioners. I know that she knows that pensioners were, in fact, compensated for the original VAT on fuel, and I acknowledge that the cut in VAT will make a difference at the margin. If that is so, it must also follow that pensioners who have private medical insurance may also be affected at the margin if sums of some £60 a month are involved.
In her opening remarks in reply to my hon. Friend the Member for Daventry, the Financial Secretary said that the Opposition had had a good try. Imitation is the sincerest form of flattery. The Opposition have had long cause in the two months since the election to note the Government's enthusiasm for reviews in every possible direction.
Given the present problems of the national health service in London, I fear for all my constituents and not just for those who have private insurance, because we do not know whether the system can take the strain of patients transferring over. Like the hon. Member for Redditch (Jacqui Smith), I have constituents who have been waiting 18 months for operations. I am concerned about how many of those who do not have medical


insurance will be adversely affected by the extra demand that this measure will create if the amendment is not carried.

Mr. Jim Murphy: I am pleased to follow the right hon. Member for Cities of London and Westminster (Mr. Brooke). I have considerable respect for him and for his contribution in varied areas of government over many years. I enjoyed the informative nature of his speech and his analysis of London's health service. I want to direct my points primarily to the amendments, so I shall not respond to the specifics of the London health service, of which I do not claim to be a specialist. However, I shall talk about the plight and aspirations of Scotland's pensioners, who will be affected by the Budget.
The Government's plans on private medical insurance have been strongly welcomed by Age Concern Scotland and the Scottish Pensioners Forum, who speak on behalf of approximately 600,000 pensioners in Scotland. More particularly, I am certain that the more than 14,000 pensioners of Eastwood will strongly support the proposals in the Finance Bill. I have not yet received any communication or telephone call giving a negative view of our plans for private medical insurance. I shall not pre-empt what may happen this weekend, when I shall have eight separate advice surgeries, but thus far none of my constituents has criticised our plans—quite the contrary.
The Government's plans to reform the health service to ensure that more people have access to quality health care have been strongly welcomed. I am certain that today's announcement on GP fundholding will be mentioned in my constituency surgeries over the weekend. Labour is trusted on the health service, which is why the Opposition's genuine concerns will not be understood or felt by the constituents of Eastwood.
The announcement in the Budget was not a surprise, whatever Conservative Members may say. In 1989, the Chancellor—then shadow Chief Secretary to the Treasury—announced that Labour would introduce this measure if we were in government. More recently, in 1996 no less, the current Chief Secretary to the Treasury stated that we would reduce VAT on domestic heating to the lowest legal minimum threshold, and reduce the subsidies for private medical insurance. That was less than a year ago, and the assertion that it was not well known in advance shows a misunderstanding of what the Government are trying to achieve.
For two reasons, the proposal did not come as a surprise. First, the Chancellor said in his Budget speech that the arrangement had not worked and was still failing. It did not encourage widespread take-up of private medical insurance, although I understand that the Conservative Government introduced measures to try to increase the take-up, which had fallen throughout the 1980s. I understand that the measures in 1989 and 1990 were intended to bring some dynamism into the market for private medical insurance.
The second reason for introducing our measures relates to VAT on domestic fuel, and our approach should be compared with that of the Conservative Government. As I have said, their approach to the matter caused significant surprise. On 6 April 1994, they introduced changes to

private medical insurance relief. It is incredible that Opposition Members have the audacity to demand of the new Government that which they did not have the confidence to present to Parliament when they were in government.

Mr. Boswell: Will the hon. Gentleman give way?

Mr. Murphy: I will give way later. The hon. Gentleman has the old hand's technique of coming to the Dispatch Box and asking to be allowed to intervene. I would be more responsive if the hon. Gentleman did not shout as he was approaching the Dispatch Box.

Mr. St. Aubyn: rose—

Mr. Murphy: I will give way to the hon. Gentleman on the Back Bench.

Mr. St. Aubyn: I am sorry that my hon. Friend the Member for Daventry (Mr. Boswell) fills the hon. Gentleman with such fear.
How will pensioners in the hon. Gentleman's constituency benefit when any cut in energy costs will be reflected by state benefit adjustments in the following years? Pensioners in his constituency will have to give up their private health insurance and increase the waiting lists, but no account is taken of that in the Government's proposals. Pensioners will suffer. Indirectly, they will lose because of the abolition of the tax relief and they will gain nothing from the reduction in VAT on fuel.

Mr. Murphy: Unlike the hon. Gentleman, I shall respond to questions. During his speech, he refused point blank to comment directly on questions that were put to him. He spoke of my refusal to allow the hon. Member for Daventry (Mr. Boswell) to intervene. I have spoken three times in the Chamber and I have been interrupted on two or three occasions by that hon. Gentleman. The experience filled me with many things, but fear was not one of them.
The hon. Member for Guildford (Mr. St. Aubyn) spoke about waiting lists. As I understand it, the vast majority of those who are currently on private medical insurance had taken it out before tax relief was introduced. People are scaremongering by saying that, as a consequence of the Government's change, people will move to the national health service. People may be tempted to do that because the NHS will be safe in the Labour Government's hands and they did not believe that it was safe under the Conservatives, but there is no independent evidence to show that people on private medical insurance will seek service in the NHS.

Mr. St. Aubyn: rose—

Mr. Murphy: The hon. Gentleman should allow me to complete my answer to his first question before rising to ask another one.
The hon. Gentleman asked how my constituents feel about subsidies. My constituents, especially pensioners, have a strong sense of what is right and what is wrong. They strongly object to the fact that every one of them paid a subsidy into the coffers of BUPA and many other private medical insurance companies and received little or


nothing in return. Because of underfunding and the mistreatment of our health service, more and more people were encouraged to take out private insurance. There was an unfair subsidy paid by the many for the few.

Mr. St. Aubyn: As the hon. Gentleman thinks that I did not answer his questions when I spoke earlier, I doubt whether he will understand what I have to say this time. The Government's proposals will indirectly reduce health spending and put the money into other areas. Anyone who is concerned about health spending must realise that Government support will fall and money will be redirected. That will damage the interests of everyone who relies on health provision.

Mr. Murphy: The hon. Gentleman's conversion to the interests of the national health service is illuminating, if a bit late. The Conservative attitude towards the NHS and the way in which it was not considered safe in their hands are two of the major reasons why we are in Government and why I have the privilege to serve the people of Eastwood. The hon. Gentleman alludes to concern about the treatment of the NHS and its funding. He has not read carefully the contents of Budget and health service pronouncements. The Chancellor in his Budget speech and other Ministers have clearly said that the health service is one of our priorities and that there is new money for it.
We should like to reach a situation in which there is no fertile ground for scaremongering and in which BUPA and others are not able to scare pensioners and others into a private system at the expense of the public system. I have given way twice to the hon. Gentleman and tried to answer his questions. He may not like the answers, but that is because we were elected on different manifestos and it would be hard to reconcile our aspirations.
Initially, BUPA and other private companies expressed some concern about the effects of our proposed changes. Those companies were aware of the changes because they commented on them before the election. If they were aware of the changes, it is strange that Opposition Members suggest that they were a surprise. The Opposition's attitude is directly parallel with their attitude to our welfare-to-work programme, which tries to enhance the opportunities for the many using the finances of the few.
As I said on Second Reading, the Opposition seem keener to protect the profits of the privatised utilities than are the utilities themselves. The direct parallel to that attitude is that Opposition Members seem keener to protect the interests of the private medical insurance companies than are the insurance companies. David Bryant is a senior representative of BUPA. As I have said, BUPA initially engaged in much scaremongering. It talked about the impact of our proposals on the NHS and said that tens of thousands or hundreds of thousands of people would move out of private medical insurance and into the NHS.
However, BUPA has revisited its analysis in a way that Conservative Members have thus far refused to do. David Bryant has said:
There are always ways that increases can be alleviated.
He believes, and BUPA seems to believe, that there are ways in which any difficulty can be alleviated. I do not claim to be a specialist on BUPA's finances, but I found

out from the House of Commons Library that last year BUPA's operating profits went up by 7 per cent and that its reserves rose by 13 per cent. to a total of £638 million.
Like other hon. Members, I do not object to the fact that such companies exist and operate in a private market. What I object to is a system whereby a majority of the pensioners of Eastwood had to subsidise the minority to support the profits of BUPA and others. If BUPA's profits are affected as a consequence of our investing in and reorienting towards a public health service, David Bryant and others will, I am sure, understand our reasons for doing so. It is not the existence of these companies or of private medical insurance that I object to: it is the fact that the majority are being asked to subsidise the minority.

Mr. Boswell: This has been a revealing debate. I have been struck by the consistency of Labour Members in referring, without exception, to their passionate concerns about the public service. There is no doubt that their ability to project that to the electorate has probably put them where they are. However, there are some Conservative Members who share those concerns. Equally, some of us are concerned—even in our own long-term interests—that Labour Members may not have spotted that concern for the public service without an understanding of the means to improve it or to generate resources for it is likely to lead to disillusion, disappointment and electoral disaster in the long term. If they pump up people's expectations and then let them down, that is a sad fraud on the electorate.
Labour Members have suggested that the right hon. Nigel Lawson did not do much analysis in introducing the measures in 1990. Of course, there can be no substitute for experience. We now have seven years, analysis of the tax. We have the annual series. We also have substantive work from the Economists Advisory Group, to which I have referred extensively and which the Government should consider and respond to.
The next point shows the difference in philosophy between the two parties. If the hon. Member for Eastwood (Mr. Murphy) had allowed me to intervene, I would have said that there is a distinction between introducing a benefit that is given by tax relief and helps quite a large group of people, and withdrawing that benefit for some nugatory and speculative advantage for the NHS as a whole.
If the Opposition could show a real benefit to the NHS from these proposals, they might be in business, but I do not believe that they can—and the Chancellor does not believe it either, because he has assigned the money that he is saving from this measure to the reduction of VAT on fuel.

Mr. Murphy: Will the hon. Gentleman give way?

Mr. Boswell: I will do so once.

Mr. Murphy: I thank the hon. Gentleman, and this is the only intervention that I plan to make. He has suggested that there is no identifiable benefit to the health service from our plans. Will he comment on the benefits to the health service of the changes that the Conservative Government brought about in 1994?

Mr. Boswell: What I do know, and we are discussing and debating the current proposals of the Chancellor,


is that, whatever happens, the plans will throw more patients back on to the NHS without providing a single extra resource for it.
Perhaps I may continue with my remarks, which I have been anxious to curtail because we have had an interesting debate. In conversation with me, one of my colleagues—a former Treasury Minister, although wild horses would not extract the name from me—once described his experience as a Treasury Minister as the best postgraduate education in town. The Financial Secretary is coming on in a couple of respects. First, she is learning Trappism: if she does not say anything or respond to the debate, I suppose that she cannot upset anyone, which may in her terms be an advance. Secondly, along the way, she has learnt the meaning of dead weight: the whole substance of the argument of Labour Members, including the Financial Secretary in her short contribution, has been that there is some dead-weight cost—that the abolition of the relief will be cost-free, with no repercussive effects.
My hon. Friends and I mentioned some specific points and I said to the Financial Secretary that there was no absolute need to reply tonight, but they remain substantial and I hope that she will reflect on them.

Dawn Primarolo: Did the hon. Gentleman read the explanatory notes on clauses? If so, he will have noticed that his questions with regard to contracts—including whether contracts entered into before 2 July would be honoured—are covered in the notes. The transitional proposals to cover those people are also detailed in the notes, as is a point that another Conservative Member made about a verbal contract and the honouring of contracts. If the hon. Member for Daventry (Mr. Boswell) had read the papers, he would know the answers to his questions.

Mr. Boswell: With the greatest respect to the hon. Lady, that is not a sufficient answer. I have posed some specific points, which she has not replied to in terms. The whole purpose of a Committee debate is for the Opposition and other Members to seek elucidation of the points. The hon. Lady may feel that she has given me those assurances, and I will look again at the notes on clauses to find out whether they are sufficient, but I do not believe that they are.
I will concede to the Financial Secretary that some policyholders will probably maintain their health insurance, regardless of the withdrawal of tax relief, if at the same time she will concede to me that some policyholders are likely to end their health insurance because of the withdrawal of that relief. The issue between us is the extent to which the measure will have real effect and the extent to which the NHS will face further pressures from the people who throw in the towel. That is why our amendment argues for a longer and more detailed analysis of the matter.
Treasury Ministers have been unable to offer that analysis. They did not submit it in the Red Book. They did not even get the figures right in the Red Book—they are entirely different from the number of people who are covered by private medical insurance. There is also a difference of opinion or doubt about the net costs of the measures. I instanced to the Financial Secretary some of

our concerns: the return of policyholders to the NHS; the likely impact on resources for the NHS; the impact of the withdrawal of insurance premium tax; the loss of fee revenue from NHS beds.
In the absence of a clear Government outline of the effects, I am drawn back to what seems an authoritative and sober analysis by an independent agency—the Economists Advisory Group, of which I know the Financial Secretary is aware. That analysis showed that the measures could produce not savings, but net losses. I am not certain of that, but the EAG concludes that when the factors to which I have referred are taken into account the total extra costs of the measures could be 9.1 per cent. above the expected net savings. I am sure that the Financial Secretary does not intend that and that the Treasury does not wish it. I hope that it will not happen, but I do not have the information to refute it.
I am not arguing that Labour Members are not committed to the public services or that they would not wish to improve them, but it would be the greatest irony and it would disappoint them and their constituents if, after all this effort and after the damage to the livelihoods of the some 500,000 people who benefit from private health insurance, there were no savings at all, even possibly net costs, and no great benefit—no benefit that will sustain the NHS for more than the twinkling of an eye and no extra resources to cope with any additional waiting lists.
In those circumstances, we should press for further analysis before casting the 600,000 policy holders on to the tender mercies of the Chancellor. I advise the Government to reflect on the impact of their measures for longer and in more detail than they have done so far, and to withdraw them.
In that spirit, I invite my right hon. and hon. Friends to support the amendment.

Amendment negatived.

It being Seven o'clock, THE CHAIRMAN put the remaining Question required by the Order [14 July] to be put at that hour.

Question put, That the clause stand part of the Bill:—

The Committee divided: Ayes 332, Noes 181.

Division No. 59]
[7 pm


AYES


Abbott, Ms Diane
Best, Harold


Adams, Mrs Irene (Paisley N)
Betts, Clive


Ainger, Nick
Blackman, Liz


Ainsworth, Robert (Cov'try NE)
Blears, Ms Hazel


Allen, Graham (Nottingham N)
Blizzard, Bob


Anderson, Donald (Swansea E)
Boateng, Paul


Anderson, Janet (Rossendale)
Borrow, David


Armstrong, Ms Hilary
Bradley, Keith (Withington)


Ashton, Joe
Brinton, Mrs Helen


Atkins, Charlotte
Brown, Rt Hon Nick (Newcastle E)


Austin, John
Brown, Russell (Dumfries)


Banks, Tony
Browne, Desmond (Kilmarnock)


Barnes, Harry
Buck, Ms Karen


Barron, Kevin
Burden, Richard


Battle, John
Burgon, Colin


Beard, Nigel
Butler, Christine


Beckett, Rt Hon Mrs Margaret
Byers, Stephen


Bell, Stuart (Middlesbrough)
Caborn, Richard


Benn, Rt Hon Tony
Campbell, Alan (Tynemouth)


Bennett, Andrew F
Campbell, Mrs Anne (C'bridge)


Benton, Joe
Campbell, Ronnie (Blyth V)






Campbell-Savours, Dale
George, Bruce (Walsall S)


Canavan, Dennis
Gerrard, Neil


Cann, Jamie
Gibson, Dr lan


Caplin, Ivor
Gilroy, Mrs Linda


Casale, Roger
Goggins, Paul


Caton, Martin
Golding, Mrs Llin


Cawsey, lan
Gordon, Mrs Eileen


Chapman, Ben (Wirral S)
Graham, Thomas


Chisholm, Malcolm
Griffiths, Jane (Reading E)


Clapham, Michael
Griffiths, Nigel (Edinburgh S)


Clark, Dr Lynda (Edinburgh Pentlands)
Griffiths, Win (Bridgend)



Grocott, Bruce


Clark, Paul (Gillingham)
Grogan, John


Clarke, Charles (Norwich S)
Gunnell, John


Clarke, Eric (Midlothian)
Hall, Mike (Weaver Vale)


Clarke, Rt Hon Tom (Coatbridge)
Hall, Patrick (Bedford)


Clarke, Tony (Northampton S)
Hamilton, Fabian (Leeds NE)


Coaker, Vernon
Hanson, David


Coffey, Ms Ann
Heal, Mrs Sylvia


Cohen, Harry
Henderson, Doug (Newcastle N)


Colman, Tony (Putney)
Henderson, Ivan (Harwich)


Connarty, Michael
Heppell, John


Cook, Frank (Stockton N)
Hesford, Stephen


Cook, Rt Hon Robin (Livingston)
Hewitt, Ms Patricia


Cooper, Yvette
Hill, Keith


Corbett, Robin
Hinchliffe, David


Corbyn, Jeremy
Hoey, Kate


Cousins, Jim
Home Robertson, John


Cranston, Ross
Hood, Jimmy


Crausby, David
Hoon, Geoffrey


Cryer, Mrs Ann (Keighley)
Hopkins, Kelvin


Cryer, John (Hornchurch)
Howarth, Alan (Newport E)


Cummings, John
Howarth, George (Knowsley N)


Cunningham, Jim (Cov'try S)
Howells, Dr Kim


Cunningham, Rt Hon Dr John (Copeland)
Hoyle, Lindsay



Hughes, Kevin (Doncaster N)


Cunningham, Ms Roseanna (Perth)
Hurst, Alan



Hutton, John


Curtis-Thomas, Mrs Claire
Iddon, Dr Brian


Dafis, Cynog
Illsley, Eric


Dalyell, Tam
Ingram, Adam


Darling, Rt Hon Alistair
Jackson, Ms Glenda (Hampstead)


Darvill, Keith
Jackson, Helen (Hillsborough)


Davey, Valerie (Bristol W)
Jamieson, David


Davies, Geraint (Croydon C)
Jenkins, Brian (Tamworth)


Davies, Rt Hon Ron (Caerphilly)
Jones, Barry (Alyn & Deeside)


Davis, Terry (B'ham Hodge H)
Jones, Ms Fiona (Newark)


Dawson, Hilton
Jones, Helen (Warrington N)


Dean, Mrs Janet
Jones, leuan Wyn (Ynys Môn)


Dewar, Rt Hon Donald
Jones, Ms Jenny (Wolverh'ton SW)


Donohoe, Brian H



Doran, Frank
Jones, Jon Owen (Cardiff C)


Drew, David
Jones, Dr Lynne (Selly Oak)


Drown, Ms Julia
Kaufman, Rt Hon Gerald


Dunwoody, Mrs Gwyneth
Keeble, Ms Sally


Eagle, Angela (Wallasey)
Keen, Alan (Feltham & Heston)


Eagle, Maria (L'pool Garston)
Keen, Mrs Ann (Brentford)


Efford, Clive
Kennedy, Jane (Wavertree)


Ellman, Ms Louise
Khabra, Piara S


Ennis, Jeff
Kidney, David


Etherington, Bill
Kilfoyle, Peter


Fatchett, Derek
King, Andy (Rugby & Kenilworth)


Field, Rt Hon Frank
Ladyman, Dr Stephen


Fisher, Mark
Lawrence, Ms Jackie


Fitzpatrick, Jim
Laxton, Bob


Fitzsimons, Lorna
Lepper, David


Flynn, Paul
Leslie, Christopher


Foster, Rt Hon Derek
Lewis, Ivan (Bury S)


Foster, Michael Jabez (Hastings)
Liddell, Mrs Helen


Foster, Michael John (Worcester)
Linton, Martin


Foulkes, George
Livingstone, Ken


Fyfe, Maria
Livsey, Richard


Galbraith, Sam
Lloyd, Tony (Manchester C)


Galloway, George
Lock, David


Gapes, Mike
Love, Andrew


Gardiner, Barry
McAllion, John





McAvoy, Thomas
Ross, Ernie (Dundee W)


McCafferty, Ms Chris
Rowlands, Ted


McCartney, lan (Makerfield)
Roy, Frank


McDonagh, Siobhain
Ruddock, Ms Joan


Macdonald, Calum
Russell, Ms Christine (Chester)


McDonnell, John
Salter, Martin


McFall, John
Sawford, Phil


McGuire, Mrs Anne
Sedgemore, Brian


McIsaac, Shona
Shaw, Jonathan


Mackinlay, Andrew
Sheerman, Barry


McNulty, Tony
Sheldon, Rt Hon Robert


MacShane, Denis
Shipley, Ms Debra


Mactaggart, Fiona
Simpson, Alan (Nottingham S)


McWalter, Tony
Singh, Marsha


Mahon, Mrs Alice
Skinner, Dennis


Mallaber, Judy
Smith Rt Hon Andrew (Oxford E)


Marek, Dr John
Smith Angela (Basildon)


Marsden, Gordon (Blackpool S)
Smith, Jacqui (Redditch)


Marsden, Paul (Shrewsbury)
Smith John (Glamorgan)


Marshall, David (Shettleston)
Smith, Llew (Blaenau Gwent)


Marshall, Jim (Leicester S)
Snape, Peter


Marshall-Andrews, Robert
Soley, Clive


Maxton, John
Spellar, John


Meale, Alan
Squire, Ms Rachel


Michael, Alun
Starkey, Dr Phyllis


Michie, Bill (Shef'ld Heeley)
Steinberg, Gerry


Milburn, Alan
Stevenson, George


Miller, Andrew
Stewart, David (Inverness E)


Mitchell, Austin
Stewart, lan (Eccles)


Moonie, Dr Lewis
Stoate, Dr Howard


Morgan, Alasdair (Galloway)
Stott, Roger


Morgan, Ms Julie (Cardiff N)
Strang , Rt Hon Dr Gavin


Morgan, Rhodri (Cardiff W)
Stringer, Graham


Morley, Elliot



Morris, Ms Estelle (B'ham Yardley)
Stuart, Ms Gisela (Edgbaston)


Morris, Rt Hon John (Aberavon)
Sutcliffe, Gerry


Mountford, Kali
Taylor, Rt Hon Mrs Ann (Dewsbury)


Mudie, George



Mullin, Chris
Taylor, Ms Dari (Stockton S)


Murphy, Jim (Eastwood)
Thomas, Gareth (Clwyd W)


Norris, Dan
Timms, Stephen


O'Brien, Bill (Normanton)
Tipping, Paddy


O'Brien, Mike (N Warks)
Todd, Mark


O'Hara, Edward
Touhig, Don


Olner, Bill
Trickett, Jon


O'Neill, Martin
Truswell, Paul


Organ, Mrs Diana
Turner, Dennis (Wolverh'ton SE)


Osborne, Mrs Sandra
Turner, Desmond (Kemptown)


Pearson, lan
Twigg, Derek (Halton)


Pendry, Tom
Twigg, Stephen (Enfield)


Perham, Ms Linda
Vaz, Keith


Pickthall, Colin
Vis, Dr Rudi


Pike, Peter L
Walley, Ms Joan


Plaskitt, James
Ward, Ms Claire


Pollard, Kerry
Watts, David


Pond, Chris
Welsh, Andrew


Pope, Greg
White, Brian


Prentice, Ms Bridget (Lewisham E)
Whitehead, Dr Alan


Prentice, Gordon (Pendle)
Wicks, Malcolm


Primarolo, Dawn
Wigley, Dafydd


Prosser, Gwyn
Williams, Rt Hon Alan (Swansea W)


Purchase, Ken



Quin, Ms Joyce
Williams, Alan W (E Carmarthen)


Quinn, Lawrie (Scarborough)
Williams, Mrs Betty (Conwy)


Radice, Giles
Wills, Michael


Rapson, Syd
Winnick, David


Reed, Andrew (Loughborough)
Wise, Audrey


Reid, Dr John (Hamilton N)
Wray, James


Robertson, Rt Hon George (Hamilton S)
Wright, Dr Tony (Cannock)



Wright, Tony D (Gt Yarmouth)


Robinson, Geoffrey (Cov'try NW)
Wyatt, Derek


Roche, Mrs Barbara



Rogers, Allan
Tellers for the Ayes:


Rooker, Jeff
Mr. David Clelland and


Rooney, Terry
Mr. Jim Dowd.






NOES


Ainsworth, Peter (E Surrey)
Hague, Rt Hon William


Allan, Richard (Shef'ld Hallam)
Hamilton, Rt Hon Sir Archie


Amess, David
Hammond, Philip


Ancram, Rt Hon Michael
Hancock, Mike


Arbuthnot, James
Harvey, Nick


Ashdown, Rt Hon Paddy
Hawkins, Nick


Atkinson, Peter (Hexham)
Heald, Oliver


Baker, Norman
Heath, David (Somerton & Frome)


Baldry, Tony
Heathcoat-Amory, Rt Hon David


Ballard, Mrs Jackie
Hogg, Rt Hon Douglas


Beggs, Roy (E Antrim)
Horam, John


Beith, Rt Hon A J
Howard, Rt Hon Michael


Bercow, John
Howarth, Gerald (Aldershot)


Blunt, Crispin
Hunter, Andrew


Body, Sir Richard
Jack, Rt Hon Michael


Boswell, Tim
Jackson, Robert (Wantage)


Bottomley, Peter (Worthing W)
Jenkin, Bernard (N Essex)


Bottomley, Rt Hon Mrs Virginia
Johnson Smith, Rt Hon Sir Geoffrey


Brady, Graham



Brand, Dr Peter
Jones, Nigel (Cheltenham)


Brazier, Julian
Key, Robert


Breed, Colin
King, Rt Hon Tom (Bridgwater)


Brooke, Rt Hon Peter
Kirkbride, Miss Julie


Browning, Mrs Angela
Kirkwood, Archy


Bruce, lan (S Dorset)
Laing, Mrs Eleanor


Bruce, Malcolm (Gordon)
Leigh, Edward


Burnett, John
Letwin, Oliver


Burns, Simon
Lewis, Dr Julian (New Forest E)


Butterfill, John
Lidington, David


Cable, Dr Vincent
Lilley, Rt Hon Peter


Cash, William
Lloyd, Rt Hon Sir Peter (Fareham)


Chapman, Sir Sydney (Chipping Barnet)
Luff, Peter



Lyell, Rt Hon Sir Nicholas


Chidgey, David
MacGregor, Rt Hon John


Chope, Christopher
MacKay, Andrew


Clark, Dr Michael (Rayleigh)
Maclean, Rt Hon David


Clarke, Rt Hon Kenneth (Rushcliffe)
Maclennan, Robert



McLoughlin, Patrick


Clifton-Brown, Geoffrey
Major, Rt Hon John


Collins, Tim
Maples, John


Colvin, Michael
Mates, Michael


Cormack, Sir Patrick
Maude, Rt Hon Francis


Cotter, Brian
Mawhinney, Rt Hon Dr Brian


Curry, Rt Hon David
May, Mrs Theresa


Davey, Edward (Kingston)
Merchant, Piers


Davies, Quentin (Grantham)
Michie, Mrs Ray (Argyll & Bute)


Day, Stephen
Moore, Michael


Donaldson, Jeffrey
Nicholls, Patrick


Dorrell, Rt Hon Stephen
Norman, Archie


Duncan, Alan
Oaten, Mark


Duncan Smith, Iain
Öpik, Lembit


Emery, Rt Hon Sir Peter
Ottaway, Richard


Evans, Nigel
Page, Richard


Faber, David
Paice, James


Fabricant, Michael
Paisley, Rev lan


Fallon, Michael
Paterson, Owen


Fearn, Ronnie
Prior, David


Flight, Howard
Redwood, Rt Hon John


Forth, Rt Hon Eric
Rendel, David


Foster, Don (Bath)
Robathan, Andrew


Fowler, Rt Hon Sir Norman
Robertson, Laurence (Tewk'b'ry)


Fraser, Christopher
Roe, Mrs Marion (Broxbourne)


Gale, Roger
Ross, William (E Lond'y)


Garnier, Edward
Rowe, Andrew (Faversham)


Gibb, Nick
Ruffley, David


Gillan, Mrs Cheryl
Russell, Bob (Colchester)


Goodlad, Rt Hon Alastair
St Aubyn, Nick


Gorman, Mrs Teresa
Sanders, Adrian


Gorrie, Donald
Sayeed, Jonathan


Gray, James
Shephard, Rt Hon Mrs Gillian


Green, Damian
Shepherd, Richard (Aldridge)


Greenway, John
Simpson, Keith (Mid-Norfolk)


Grieve, Dominic
Smith, Sir Robert (W Ab'd'ns)


Gummer, Rt Hon John
Smyth, Rev Martin (Belfast S)





Soames, Nicholas
Trend, Michael


Spelman, Mrs Caroline
Tyler, Paul


Spicer, Sir Michael
Tyrie, Andrew


Spring, Richard
Viggers, Peter


Stanley, Rt Hon Sir John
Wallace, James


Steen, Anthony
Walter, Robert


Streeter, Gary
Wardle, Charles


Stunell, Andrew
Waterson, Nigel


Swayne, Desmond
Webb, Professor Steve


Syms, Robert
Whitney, Sir Raymond


Tapsell, Sir Peter
Whittingdale, John


Taylor, lan (Esher & Walton)
Widdecombe, Rt Hon Miss Ann


Taylor, Rt Hon John D (Strangford)
Willis, Phil


Taylor, John M (Solihull)
Wilshire, David


Taylor, Matthew (Truro)
Woodward, Shaun


Taylor, Sir Teddy
Yeo, Tim


Temple-Morris, Peter
Young, Rt Hon Sir George


Thompson, William



Tonge, Dr Jenny
Tellers for the Noes:


Townend, John
Mr. Malcolm Moss and


Tredinnick, David
Mr. James Cran.

Question accordingly agreed to.

Clause 15 ordered to stand part of the Bill.

Clause 19

PENSION FUNDS NO LONGER ENTITLED TO PAYMENT OF TAX CREDITS

Dr. Cable: I beg to move amendment No. 15, in page 12, line 41, leave out from "section" to end of line 42 and insert
shall not take effect until Her Majesty's Government has published an assessment of the effects of this section on local authority finance for 1997–98, 1998–99, 1999–2000 and 2000–01.".
The background to amendment No. 15 is our general concern about the Budget's advance corporation tax reforms. Because of anomalies and distortions, there is a good case for tax reform in this sphere. It has become clear in the very short time that has been made available to us that many of the anomalies that arise from the reforms have not been properly thought about. The specific matter that our amendment is meant to highlight is the impact the ACT reforms will have on local government. They will result not in a saving to the public sector but in a shuffling of resources within the public sector.
The reforms will affect a large part of the public sector. About 10 per cent. of the asset value of pension funds under management is accounted for by local authorities, so a large chunk of the pension industry and a very large number of people are affected. About 1.25 million people are paying into local authority pension funds and about 1.6 million people are local authority pension fund pensioners.
We are considering pension funds that are in a state of financial crisis, a large part of which was caused by the actions of the previous Government. Local authority pension funds were allowed to reduce their funding requirements from 100 per cent. to 75 per cent. Such a reduction in the private sector would have been excoriated as highly unethical. None the less, local authorities were encouraged to take that action to reduce poll tax bills. Consequently, many local authority pension funds are in dire financial trouble, which must be repaired.
Furthermore, local authority pension funds now have an additional cost to bear of about £300 million. The Local Government Association provided that estimate and, as it is Labour-dominated, one might assume that the figure is not over-estimated. Where will that additional money be found? How will it be paid for? Full understanding of the matter will not be possible until next March when, according to an answer provided by the Minister for London and Construction to a parliamentary question, an actuarial review is due. By next March or April, therefore, we should have a proper understanding of the state of local authority pension funds after the changes.
Our concern is that the Bill is being rushed through before those implications are properly spelt out. Logically, we can think of various consequences, one of which is that the burden will be borne in reduced benefits by local authority pensioners. Another possibility is that services will be cut to top up pension funds. Another is that the burden will be borne fully by the council tax. One estimate is that council tax might have to rise by, on average, 10 to 20 per cent. to make good the deficit.
As the Government have insisted on capping, it is very likely that local authorities will have to choose painful options. The context in which the very difficult decisions have to be made is that local authorities are, as we know, facing great financial difficulties. Many Labour Members come from local authorities under Labour control and have had responsibility for managing them. They therefore know the difficulties.
We estimate that there will be a real cut in local authority budgets of about 1 or 2 per cent. next year. As a result of questions put to the House of Commons Library, we have established that the impact of higher rates of inflation will be to take out of central Government support for local authorities about £570 million this year and double that next year. The Audit Commission report published this morning referred to a gap of about £5 billion in local authority capital spending; so the £300 million, which is the extra damage being inflicted on local authority pension funds, comes on top of considerable difficulties.
We appeal to the Government to give us a clear understanding of what the burden will be and how it will be paid for. Also, we want to hear that local authorities will be recompensed for the additional burden they will have to bear. I commend the amendment to the Committee.

Mr. John MacGregor: I support the amendment. I know that the Committee wants to make progress, so I shall be brief.
I was so concerned about this part of the Budget proposals—as I am about all of those that affect pension funds and ACT—that I got in touch with the chief executive of Norfolk county council straight away. He informed me that, although it is a bit early for the council to be absolutely sure and that he hoped to have an actuarial view in the early autumn, his current assessment is that the change will require an additional contribution of £5 million a year from the county council for one pension fund alone to meet the extra bill for county council employees. That would be the current employer's contribution rate.
In accordance with the relevant regulations, the next effective date for increased contributions is April 1999. That seems to reinforce the point made by the hon.

Member for Twickenham (Dr. Cable). There is great concern about what will happen in 1999 and what the effect will be by then of having to meet extra contributions earlier. County councils have very real concerns, and it is likely that the additional cost will have to be met from increases in council tax. It is therefore important to sort the matter out now so that county councils, local authorities and others know where they stand. I strongly support the amendment.

Mr. David Heathcoat-Amory: I support the amendment. There is no doubt that all local authorities with funded pension schemes have faced an immediate and large cut in their pension fund income. That started from the actual date of the Budget, so it is already happening. The size of the cut is open to dispute, but it certainly amounts to several hundred million pounds a year.
The answer to a written question asked by my hon. Friend the Member for South Suffolk (Mr. Yeo) states that the local government pension scheme, to which I understand most local authorities belong, has an annual income of some £2.1 billion. If all that were invested in UK equities, the change would mean a drop in income of some £400 million a year. That may be unrealistically large, but even if we assume that only 60 per cent. is invested in UK equities, it still means an annual reduction in income of some £250 million.
My county, Somerset, has estimated that it faces having to make up a shortfall of some £2.1 million. That is for the Somerset fund as a whole, which includes the district councils. Devon county council reports a drop in income of at least £3.5 million in a full year.
The Local Government Association wrote to the Government estimating the drop to be about £300 million a year, and made the good point that it would be quite irresponsible to ignore the matter now. Government advice appears to be to ignore the problem at the moment and simply roll up the deficit in the hope that the Government make good the shortfall in two or three years' time. I suggest to the Economic Secretary that that is irresponsible. No commercial organisation would dream of ignoring a drop of that magnitude in its income; it would reserve for it annually. Local authorities therefore face having to make up the deficit by cutting services.
Somerset expects to be rate-capped later this week by Government order, so, even if it wanted to, there is no prospect of its placing the burden on the council tax payer. It has to cut services. Is it the Economic Secretary's advice that local authorities should ignore the consequences of the Budget and the shortfall in their pension funds, either because she does not think it is very important to maintain pension contributions and eventual benefits to members of funds or in the hope that the Government will make up the shortfall in due course? If the latter is the case, will she promise local authorities and the Committee that she will indeed make up the difference, preferably now? If she can provide no certainty this year, will she at least do so in due course?

The Economic Secretary to the Treasury (Mrs. Helen Liddell): I congratulate the hon. Member for Twickenham (Dr. Cable) on managing to get the


amendment selected. He has done rather better than the official Opposition who, despite their crocodile tears about this issue, have not been particularly successful in tabling amendments. It is interesting to hear Conservative Members express concern about local authorities—would that they had done so some time ago.
The hon. Member for Twickenham recognises that the purpose of the abolition of ACT is to deal with distortions in the taxation system. He also recognises that those distortions exist. However, the amendment would delay implementation of the clause restricting the payment of tax credits until after the Government had reported on the effect of the change on local authority finances. Were the amendment to be accepted, one effect would be to produce opportunities for pension funds to sidestep the change by getting companies to pay dividends in the meantime. That in itself would add to the distortion with which we are dealing.
I recognise the extent of the publicity about the abolition of tax credits for pension funds. I am aware of the good intentions behind the amendment, but it is wrong to seek to scaremonger. I share the concern about the impact on any pension fund, but we have to take into account the fact that there is to be a revaluation of local authority pension schemes in England and Wales in March 1998. I am conscious that the hon. Member for Gordon (Mr. Bruce) is in his place—in Scotland, the revaluation will not take place until the following year.
There will therefore be no impact on local authority budgets in England and Wales until 1999 to 2000. That means that there is no immediate need to provide increased support for local authorities. Indeed, there will be other factors to take into account, not least a valid point made by actuaries themselves, which is that, because of the changes in corporation tax, actuarial calculations will have to take account of the increased capital values of companies.
I must take up the point raised by the right hon. Member for Wells (Mr. Heathcoat-Amory) about local authority pension funds investing all their reserves in equities. That is unrealistic. I recognise that the right hon. Gentleman acknowledged that.

Mr. Heathcoat-Amory: I specifically did not assume that all the funds were invested in UK equities. I made a rough calculation on the basis that only 60 per cent. were—a fairly modest figure. Will the Minister give her estimate of the collective drop in income experienced by local authorities as a result of the Budget? She must have done that work. Her officials must have advised her during the planning of the Budget. The Committee would be grateful if she would impart the information, in the spirit of openness.

Mrs. Liddell: I am sure that the right hon. Gentleman is being mischievous rather than naive. He is well aware that it would be bizarre to attempt to second-guess what will happen in equities markets. If I could do that, I would probably replace Mystic Meg on the national lottery programme.
One important effect of the abolition of tax credits is that it allows companies to take decisions on their future performance and to invest from retained profits, leading to growth in those companies. That growth will result in better dividends.
There is a bizarre obsession with the short term here. We are talking about a situation that will not come to fruition until 1999–00. The right hon. Gentleman invites me to say whether the Government are ignoring the advice of local authorities. It would be foolish for the Government to jump to conclusions before the revaluation of pension funds in March 1998—March 1999 for Scottish local authorities. I am surprised that someone of the right hon. Gentleman's experience should make that point.
The right hon. Member for South Norfolk (Mr. MacGregor) talked about increases in council tax bills. He is falling into the same trap as the right hon. Member for Wells, trying to extrapolate figures that no one can know until after the revaluations. After those revaluations next spring, actuaries will have to take into account the capital values of companies.

Mr. Malcolm Bruce: The Minister is making an interesting point, saying that we should not worry about this until the actuarial revaluations have been done. Does she not acknowledge that, when a tax relief that has been in place for many years is removed, it is a reasonable assumption that contributions will have to go up? Will she give an assurance that, if local authorities have to find extra money, the Government, who control 85 per cent. of their revenue, will make up the difference, or at least undertake to take it into account?

Mrs. Liddell: The hon. Gentleman makes a valid point, but there is more to the revaluation than simply looking at the impact of the abolition of tax credits. Capital valuations also have to be taken into account. Any Government reviewing local authority settlements have to consider the broader picture. We shall do that in due course.
I therefore regret that it is not possible for the Government to accept the amendment. I hope that it will not be pressed to a Division.

Dr. Cable: We intend to press the amendment to a Division, because we do not believe that we are scaremongering by raising our concerns.
One of the useful aspects of this short but focused debate has been the additional colour that has been supplied. We have heard from Norfolk and Somerset, where councils are directly affected. Yesterday, Oxfordshire county council, which is controlled by Labour and the Liberal Democrats, produced a report estimating an additional £4 million cost resulting from the measure. Council treasurers throughout the country, who are not of any political leaning, are expressing great concern about the measure and the loss of income that will result from it. They want reassurance about how they are to deal with it when the time comes.
My hon. Friend the Member for Gordon (Mr. Bruce) has already said that, although an actuarial analysis will


be made in due course, there will be a loss of income. That is why we want to push the amendment to a Division.

Question put, That the amendment be made:—

The Committee divided: Ayes 176, Noes 313.

Division No. 60]
[7.34 pm


AYES


Ainsworth, Peter (E Surrey)
Gillan, Mrs Cheryl


Allan, Richard (Shef'ld Hallam)
Goodlad, Rt Hon Alastair


Amess, David
Gorman, Mrs Teresa


Ancram, Rt Hon Michael
Gorrie, Donald


Arbuthnot, James
Gray, James


Ashdown, Rt Hon Paddy
Green, Damian


Atkinson, Peter (Hexham)
Grieve, Dominic


Baker, Norman
Gummer, Rt Hon John


Baldry, Tony
Hague, Rt Hon William


Ballard, Mrs Jackie
Hamilton, Rt Hon Sir Archie


Beggs, Roy (E Antrim)
Hammond, Philip


Beith, Rt Hon A J
Hancock, Mike


Bercow, John
Harris, Dr Evan


Blunt, Crispin
Harvey, Nick


Body, Sir Richard
Hawkins, Nick


Boswell, Tim
Heald, Oliver


Bottomley, Peter (Worthing W)
Heath, David (Somerton & Frome)


Bottomley, Rt Hon Mrs Virginia
Heathcoat-Amory, Rt Hon David


Brady, Graham
Horam, John


Brand, Dr Peter
Howard, Rt Hon Michael


Brazier, Julian
Howarth, Gerald (Aldershot)


Breed, Colin
Hughes, Simon (Southwark N)


Brooke, Rt Hon Peter
Hunter, Andrew


Browning, Mrs Angela
Jack, Rt Hon Michael


Bruce, lan (S Dorset)
Jackson, Robert (Wantage)


Bruce, Malcolm (Gordon)
Jenkin, Bernard (N Essex)


Burnett, John
Johnson Smith, Rt Hon Sir Geoffrey


Burns, Simon



Butterfill, John
Jones, Nigel (Cheltenham)


Cable, Dr Vincent
Key, Robert


Cash, William
King, Rt Hon Tom (Bridgwater)


Chapman, Sir Sydney (Chipping Barnet)
Kirkbride, Miss Julie



Kirkwood, Archy


Chidgey, David
Laing, Mrs Eleanor


Chope, Christopher
Leigh, Edward


Clarke, Rt Hon Kenneth (Rushcliffe)
Letwin, Oliver



Lewis, Dr Julian (New Forest E)


Clifton-Brown, Geoffrey
Lidington, David


Collins, Tim
Lilley, Rt Hon Peter


Colvin, Michael
Livsey, Richard


Cormack, Sir Patrick
Lloyd, Rt Hon Sir Peter (Fareham)


Cotter, Brian
Luff, Peter


Cran, James
Lyell, Rt Hon Sir Nicholas


Cunningham, Ms Roseanna (Perth)
MacGregor, Rt Hon John



MacKay, Andrew


Curry, Rt Hon David
Maclennan, Robert


Dafis, Cynog
McLoughlin, Patrick


Davis, Rt Hon David (Haltemprice)
Major, Rt Hon John


Davies, Quentin (Grantham)
Maples, John


Day, Stephen
Mates, Michael


Donaldson, Jeffrey
Mawhinney, Rt Hon Dr Brian


Dorrell, Rt Hon Stephen
May, Mrs Theresa


Duncan, Alan
Merchant, Piers


Duncan Smith, Iain
Michie, Mrs Ray (Argyll & Bute)


Evans, Nigel
Moore, Michael


Faber, David
Morgan, Alasdair (Galloway)


Fabricant, Michael
Moss, Malcolm


Fallon, Michael
Nicholls, Patrick


Fearn, Ronnie
Norman, Archie


Forth, Rt Hon Eric
Oaten, Mark


Foster, Don (Bath)
Öpik, Lembit


Fowler, Rt Hon Sir Norman
Ottaway, Richard


Fraser, Christopher
Page, Richard


Gale, Roger
Paice, James


Gibb, Nick
Paterson, Owen





Prior, David
Taylor, lan (Esher & Walton)


Redwood, Rt Hon John
Taylor, John M (Solihull)


Rendel, David
Taylor, Matthew (Truro)


Robathan, Andrew
Taylor, Sir Teddy


Robertson, Laurence (Tewk'b'ry)
Thompson, William


Roe, Mrs Marion (Broxbourne)
Tonge, Dr Jenny


Ross, William (E Lond'y)
Townend, John


Rowe, Andrew (Faversham)
Tredinnick, David


Ruffley, David
Tyrie, Andrew


Russell, Bob (Colchester)
Viggers, Peter


St Aubyn, Nick
Wallace, James


Sanders, Adrian
Walter, Robert


Sayeed, Jonathan
Wardle, Charles


Shephard, Rt Hon Mrs Gillian
Waterson, Nigel


Shepherd, Richard (Aldridge)
Webb, Professor Steve


Simpson, Keith (Mid-Norfolk)
Wells, Bowen


Smith, Sir Robert (W Ab'd'ns)
Welsh, Andrew


Smyth, Rev Martin (Belfast S)
Whittingdale, John


Soames, Nicholas
Widdecombe, Rt Hon Miss Ann


Spelman, Mrs Caroline
Wigley, Dafydd


Spring, Richard
Woodward, Shaun


Stanley, Rt Hon Sir John
Yeo, Tim


Steen, Anthony
Young, Rt Hon Sir George


Streeter, Gary



Stunell, Andrew
Tellers for the Ayes:


Swayne, Desmond
Mr. Paul Tyler and


Syms, Robert
Mr. Edward Davey.




NOES


Abbott, Ms Diane
Chapman, Ben (Wirral S)


Adams, Mrs Irene (Paisley N)
Chaytor, David


Ainger, Nick
Chisholm, Malcolm


Ainsworth, Robert (Cov'try NE)
Clapham, Michael


Allen, Graham (Nottingham N)
Clark, Dr Lynda (Edinburgh Pentlands)


Anderson, Janet (Rossendale)



Armstrong, Ms Hilary
Clark, Paul (Gillingham)


Ashton, Joe
Clarke, Charles (Norwich S)


Atkins, Charlotte
Clarke, Eric (Midlothian)


Austin, John
Clarke, Rt Hon Tom (Coatbridge)


Banks, Tony
Clarke, Tony (Northampton S)


Barnes, Harry
Clelland, David


Barron, Kevin
Coaker, Vernon


Battle, John
Coffey, Ms Ann


Beard, Nigel
Cohen, Harry


Bell, Stuart (Middlesbrough)
Colman, Tony (Putney)


Benn, Rt Hon Tony
Connarty, Michael


Bennett, Andrew F
Cook, Frank (Stockton N)


Benton, Joe
Cook, Rt Hon Robin (Livingston)


Best, Harold
Cooper, Yvette


Betts, Clive
Corbett, Robin


Blackman, Liz
Corbyn, Jeremy


Blears, Ms Hazel
Cousins, Jim


Blizzard, Bob
Cranston, Ross


Boateng, Paul
Crausby, David


Borrow, David
Cryer, Mrs Ann (Keighley)


Bradley, Keith (Withington)
Cryer, John (Hornchurch)


Bradshaw, Ben
Cummings, John


Brinton, Mrs Helen
Cunningham, Jim (Cov'try S)


Brown, Rt Hon Nick (Newcastle E)
Cunningham, Rt Hon Dr John (Copeland)


Brown, Russell (Dumfries)



Browne, Desmond (Kilmarnock)
Curtis-Thomas, Mrs Claire


Buck, Ms Karen
Dalyell, Tarn


Burden, Richard
Darling, Rt Hon Alistair


Burgon, Colin
Darvill, Keith


Butler, Christine
Davey, Valerie (Bristol W)


Byers, Stephen
Davies, Rt Hon Denzil (Llanelli)


Campbell, Alan (Tynemouth)
Davies, Geraint (Croydon C)


Campbell, Mrs Anne (C'bridge)
Davies, Rt Hon Ron (Caerphilly)


Campbell, Ronnie (Blyth V)
Davis, Terry (B'ham Hodge H)


Campbell-Savours, Dale
Dawson, Hilton


Canavan, Dennis
Dean, Mrs Janet


Cann, Jamie
Dewar, Rt Hon Donald


Caplin, Ivor
Donohoe, Brian H


Casale, Roger
Doran, Frank


Caton, Martin
Dowd, Jim


Cawsey, lan
Drew, David






Drown, Ms Julia
Keen, Mrs Ann (Brentford)


Dunwoody, Mrs Gwyneth
Kennedy, Jane (Wavertree)


Eagle, Angela (Wallasey)
Khabra, Piara S


Eagle, Maria (L'pool Garston)
Kidney, David


Efford, Clive
Kilfoyle, Peter


Ellman, Ms Louise
King, Andy (Rugby & Kenilworth)


Ennis, Jeff
King, Ms Oona (Bethnal Green)


Etherington, Bill
Ladyman, Dr Stephen


Fatchett, Derek
Lawrence, Ms Jackie


Field, Rt Hon Frank
Laxton, Bob


Fisher, Mark
Lepper, David


Fitzpatrick, Jim
Leslie, Christopher


Fitzsimons, Lorna
Lewis, Ivan (Bury S)


Flynn, Paul
Liddell, Mrs Helen


Foster, Rt Hon Derek
Linton, Martin


Foster, Michael Jabez (Hastings)
Lloyd, Tony (Manchester C)


Foster, Michael John (Worcester)
Lock, David


Foulkes, George
Love, Andrew


Fyfe, Maria
McAllion, John


Galbraith, Sam
McAvoy, Thomas


Galloway, George
McCafferty, Ms Chris


Gapes, Mike
McCartney, lan (Makerfield)


Gardiner, Barry
McDonagh, Siobhain


George, Bruce (Walsall S)
Macdonald, Calum


Gerrard, Neil
McDonnell, John


Gibson, Dr lan
McGuire, Mrs Anne


Gilroy, Mrs Linda
McIsaac, Shona


Goggins, Paul
Mackinlay, Andrew


Golding, Mrs Llin
McNulty, Tony


Gordon, Mrs Eileen
MacShane, Denis


Graham, Thomas
Mactaggart, Fiona


Griffiths, Jane (Reading E)
McWalter, Tony


Griffiths, Nigel (Edinburgh S)
Mahon, Mrs Alice


Griffiths, Win (Bridgend)
Mallaber, Judy


Grocott, Bruce
Marsden, Gordon (Blackpool S)


Grogan, John
Marshall, David (Shettleston)


Gunnell, John
Marshall, Jim (Leicester S)


Hall, Mike (Weaver Vale)
Marshall-Andrews, Robert


Hall, Patrick (Bedford)
Maxton, John


Hamilton, Fabian (Leeds NE)
Michie, Bill (Shef'ld Heeley)


Hanson, David
Milburn, Alan


Heal, Mrs Sylvia
Miller, Andrew


Henderson, Doug (Newcastle N)
Mitchell, Austin


Henderson, Ivan (Harwich)
Moonie, Dr Lewis


Heppell, John
Morgan, Ms Julie (Cardiff N)


Hesford, Stephen
Morgan, Rhodri (Cardiff W)


Hewitt, Ms Patricia
Morley, Elliot


Hill, Keith
Morris, Ms Estelle (B'ham Yardley)


Hinchliffe, David
Mountford, Kali


Home Robertson, John
Mudie, George


Hood, Jimmy
Mullin, Chris


Hoon, Geoffrey
Murphy, Jim (Eastwood)


Hopkins, Kelvin
Norris, Dan


Howarth, Alan (Newport E)
O'Brien, Bill (Normanton)


Howarth, George (Knowsley N)
O'Brien, Mike (N Warks)


Howells, Dr Kim
O'Hara, Edward


Hoyle, Lindsay
Olner, Bill


Hughes, Kevin (Doncaster N)
O'Neill, Martin


Hurst, Alan
Organ, Mrs Diana


Hutton, John
Osborne, Mrs Sandra


Iddon, Dr Brian
Pearson, lan


Illsley, Eric
Pendry, Tom


Ingram, Adam
Perham, Ms Linda


Jackson, Ms Glenda (Hampstead)
Pickthall, Colin


Jackson, Helen (Hillsborough)
Pike, Peter L


Jenkins, Brian (Tamworth)
Plaskitt, James


Jones, Barry (Alyn & Deeside)
Pollard, Kerry


Jones, Ms Fiona (Newark)
Pond, Chris


Jones, Helen (Warrington N)
Pope, Greg


Jones, Ms Jenny (Wolverh'ton SW)
Prentice, Ms Bridget (Lewisham E)



Prentice, Gordon (Pendle)


Jones, Jon Owen (Cardiff C)
Primarolo, Dawn


Jones, Dr Lynne (Selly Oak)
Purchase, Ken


Kaufman, Rt Hon Gerald
Quin, Ms Joyce


Keeble, Ms Sally
Quinn, Lawrie (Scarborough)


Keen, Alan (Feltham & Heston)
Radice, Giles





Rapson, Syd
Stuart, Ms Gisela (Edgbaston)


Reed, Andrew (Loughborough)
Taylor, Rt Hon Mrs Ann (Dewsbury)


Reid, Dr John (Hamilton N)



Robinson, Geoffrey (Cov'try NW)
Taylor, Ms Dari (Stockton S)


Roche, Mrs Barbara
Thomas, Gareth (Clwyd W)


Rogers, Allan
Timms, Stephen


Rooker, Jeff
Tipping, Paddy


Rooney, Terry
Todd, Mark


Ross, Ernie (Dundee W)
Touhig, Don


Rowlands, Ted
Trickett, Jon


Roy, Frank
Truswell, Paul


Ruddock, Ms Joan
Turner, Dennis (Wolverh'ton SE)


Russell, Ms Christine (Chester)
Turner, Desmond (Kemptown)


Sawford, Phil
Twigg, Derek (Halton)


Sedgemore, Brian
Twigg, Stephen (Enfield)


Shaw, Jonathan
Vaz, Keith


Sheerman, Barry
Vis, Dr Rudi


Sheldon, Rt Hon Robert
Walley, Ms Joan


Shipley, Ms Debra
Ward, Ms Claire


Simpson, Alan (Nottingham S)
Watts, David


Singh, Marsha
White, Brian


Skinner, Dennis
Whitehead, Dr Alan


Smith, Rt Hon Andrew (Oxford E)
Wicks, Malcolm


Smith, Angela (Basildon)
Williams, Rt Hon Alan (Swansea W)


Smith, Jacqui (Redditch)



Smith, John (Glamorgan)
Williams, Alan W (E Carmarthen)


Smith, Llew (Blaenau Gwent)
Williams, Mrs Betty (Conwy)


Snape, Peter
Wills, Michael


Soley, Clive
Winnick, David


Squire, Ms Rachel
Wise, Audrey


Starkey, Dr Phyllis
Wray, James


Steinberg, Gerry
Wright, Dr Tony (Cannock)


Stevenson, George
Wright, Tony D (Gt Yarmouth)


Stewart, David (Inverness E)
Wyatt, Derek


Stewart, lan (Eccles)



Stoate, Dr Howard
Tellers for the Noes:


Stott, Roger
Mr. John McFall and


Stringer, Graham
Mr. David Jamieson.

Question accordingly negatived.

Mr. Gibb: I beg to move amendment No. 16, page 12, line 42, at end insert—
'(4) Section 468Q of the Taxes Act 1988 (dividend distributions to corporate unit holder) shall be amended as follows—

(a) In subsection (1) at the end of paragraph (b) there shall be inserted—
"or is a pension fund as defined in section 231A(4)"
(b) In subsection (2) the words "or income tax" shall be inserted after the words "corporation tax".".

I should at the outset declare an interest, in that I am a chartered accountant, a member of the Institute of Chartered Accountants in England and Wales, and I write a six-weekly article for Accountancy Age.
The amendment seeks to deal with an anomaly created by clause 19, which has been caused, like so much else in the Finance Bill, by the rushed and ill considered way in which the new Labour Government are proceeding. As such, and in the spirit of ensuring that the House produces well drafted legislation, I hope that the Government will accept the amendment.
The anomaly in question concerns the position of pension funds that invest through unit trusts. Clause 19 prevents pension funds from reclaiming the tax credits on dividend income—an outrageous change to the previous position, which all parties had accepted, that pension funds should be allowed to accumulate assets from income tax-free, thus encouraging the build-up of pension fund assets. As far as we know, it is not the


Government's intention to tax other income within a pension fund, such as interest income and income from property. At the moment, all the Government intend to do is tax dividend income received by pension funds.
The problem arises when a pension fund invests in a unit trust that itself invests in bonds or property. Unit trusts themselves are taxable, but pension funds could effectively reclaim the tax by receiving the tax credits attached to the dividend paid by the unit trust. Now that pension funds are no longer able to reclaim that credit, investing in a balanced unit trust becomes unviable for them, because that would now be taxable. However, if the pension fund itself received the income, it would be non-taxable.
If the Government accepted the amendment, it would apply existing provisions in section 468 of the Taxes Act 1988 to stream income paid by a unit trust to reflect the nature of the income it receives, and enable the recipient to claim back only the tax on the income that, had it received such income directly, would not have been taxable. Applying those provisions to pension funds would deal with the problem.

Mrs. Liddell: I regret to tell the hon. Member for Bognor Regis and Littlehampton (Mr. Gibb) that I cannot accept his amendment, but I congratulate him, as a new Member, on getting his amendment debated, albeit briefly. However, I do not see too much enthusiasm for his amendment among his hon. Friends. I do not accept his argument about the anomalous position.
I shall go into some of the background to the debate. Authorised unit trusts were introduced as vehicles for investment by individuals, and can be included in personal equity plans. Most PEP-ed investment is in authorised unit trusts and investment trusts. The tax rules are designed to ensure that tax-paying individuals do no worse by investing via an authorised unit trust than they would if they were to invest directly. Those rules involve treating authorised unit trusts like companies for taxation purposes, and the dividends that they pay out to pension funds are treated by clause 19 in exactly the same way as dividends paid to pension funds by a UK company. That is the structure for authorised unit trusts.
I come to my point of disagreement with the hon. Member for Bognor Regis and Littlehampton. I do not accept that the position of authorised unit trusts is anomalous. An authorised unit trust that pays dividends out of income it receives from a mixed investment portfolio is in exactly the same position as an investment trust or any other company that pays dividends out of profits arising from different income sources.
Furthermore, most pension fund investment through unit trusts in real property is done through unauthorised rather than authorised unit trusts. The treatment of interest and rental income flowing through unauthorised unit trusts to pension funds will not be affected in any way by our proposals. It is now open to many pension funds to invest through pension fund pooling vehicles—a type of unit trust that receives a completely transparent tax treatment.
The justification for the amendment is not clear. I know that the change has been touted by the Association of Unit Trusts and Investment Funds, which has written to my hon. Friend the Paymaster General on the subject. However, it is not apparent that the issue is a major one,

not least because pension funds can and do invest in real property through unauthorised unit trusts rather than authorised ones.
I can give the hon. Member and the Committee an assurance that we will review the position should compelling reasons emerge why a pension fund investing in property through an unauthorised unit trust or pension fund pooling vehicle might be placed at a real disadvantage compared with one investing through an authorised unit trust. I am sorry that that sounds so convoluted, but it is better to get the clear position on the record.
We see no justification for the amendment, and we do not accept that the change it would make is especially necessary. Pension funds can take action to avoid being disadvantaged in the way that has been suggested. The amendment would also have repercussions, because pension funds would want similar treatment for other dividends, and it would run counter to the whole thrust of the tax credit changes. The Government cannot accept the amendment.

Mr. Gibb: I am grateful to the hon. Lady for accepting that, without the amendment, pension funds will be put at a disadvantage if they continue to invest through authorised unit trusts. The Government's position will be a great disappointment to the industry, because that is another unintended consequence of the proposals, which will require the pensions industry to make sweeping changes to its investment policy as a result of one Budget measure. However, in the interests of later debate, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

Mrs. Liddell: I realise that the Opposition were anxious to have a wide debate on this issue, and I am willing to allow them as much time as possible. I will take on board any points they make, and sum up in some detail later. I stress that the purpose of removing tax credits is specifically to ensure that we remove a distortion from the tax system. The previous Government started the process, and we seek to promote a tax system that is fairer and that encourages longer-term investment in companies.

Mr. Heathcoat-Amory: I am glad that the Financial Secretary will answer the debate in some detail, because we have several questions that remain unanswered. So far, we have been unsuccessful in getting the Government to come clean about what really happened on Budget day to their promises on taxation. More specifically, the Government have not come clean about the damage they have done to millions of people who contribute to pension schemes.
Nowhere was the Government's pledge not to increase taxes more quickly—and deceitfully—broken than in clause 19. I wish to establish beyond dispute that the abolition of dividend tax credits for pension fund contributors was a huge tax increase. From Budget day, all pension funds investing in UK equities suffered an immediate and serious drop in their income. I say immediate because the provision took effect from Budget day.
The Government will get an extra £5 billion a year from the change. There is no magic about that—the money has to come from other people. The new Government have a large majority and can repeal many things, but they cannot repeal the laws of arithmetic. If the Government take £5 billion a year from the income accruing to pension funds, clearly that will have an impact on the millions of ordinary people who contribute to those schemes. They will be hit by an eventual reduction in their pension benefits or by the need to increase their contributions.
I make no apology to the Committee for returning to the stated view of the Government on the effects of their proposals. The words of the Financial Secretary were:
The measure"—
she was referring to the abolition of advance corporation tax credits—
is good for pensions and pensioners… People should understand that our reforms will benefit pension funds."—[Official Report, 3 July 1997; Vol. 297, c. 507.]
Those words have gone unamended and uncorrected in the ensuing days, so that remains the official Government view of the effect of these tax changes on pension funds. This enormous tax hit is a benefit for pensioners and pension funds.
It is almost breathtaking that the Government can continue to assert that taking £5 billion a year from those who contribute to such schemes is good for them. If that is new Labour economics, we have been warned.
The Chancellor was hardly any better on Budget Day. He airily dismissed the matter by saying that pension funds were mostly in surplus, so no one would really be any the worse off. I have news for the Government. More than three quarters of UK pension funds are money-purchase schemes. They do not have surpluses. There is no pot of gold in money-purchase schemes that enables the Government to raid them without anyone noticing. The Budget simply reduces the prospective pensions paid for by those money-purchase schemes, or it will require contributors to them to increase their monthly payments.
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Typically, a 30-year-old with such a money-purchase scheme will now have to pay between £12 and £20 a month extra to maintain his or her benefits. To be told by the Government that that change is good for contributors is an insult.
As the hon. Lady is clearly anxious to respond, I invite her to repudiate the words of the Financial Secretary, or to explain how it can be good for someone to have to pay in between £12 and £20 a month extra for the same prospective pension.

Mrs. Liddell: I am grateful to the right hon. Gentleman for giving way. I shall deal first with the second point—payments into money-purchase schemes. Will the right hon. Gentleman inform the Committee on what basis his sums were arrived at? Anyone who knows money-purchase schemes knows that there are different impacts at different ages.
Secondly, on the point made by my hon. Friend the Financial Secretary, it is a well known fact that the strength of British companies is mirrored in the

performance of pension funds. Indeed, her point is perfectly correct. If companies perform better and are stronger, with more stable long-term growth, that inevitably benefits pension funds. Will the right hon. Gentleman explain why, whenever the previous Government reduced tax credits, there was no mention of pension funds at that time?

Mr. Heathcoat-Amory: I am afraid that that simply will not do as an apology or explanation for the extraordinary remarks of the Financial Secretary on 3 July. The Economic Secretary has not explained how it is good for pensions and pensioners to have a sum of £5 billion a year extracted from the schemes.
The hon. Lady asked where my sums came from. I can explain in outline that, if there is a 20 per cent. cut by the abolition of ACT credits accruing to a pension fund, it follows that that income stream, discounted to the present day, has been cut by 20 per cent. Therefore, a pension fund investing purely in UK equities has been affected by that amount.
I generously recognise, however, that most UK pension funds do not invest only in UK equities. I therefore assume, for the sake of argument—the figures have been prepared for me by actuaries and outside commentators—that 60 per cent. is a reasonable figure to assume that many pension funds invest in UK equities. If that is so, the reduction is 12 per cent., not 20 per cent.
It is entirely fair for me to suppose that a man or woman contributing £100 a month to a pension scheme will have to increase contributions by the sum I mentioned. If the hon. Lady has alternative figures, we would be grateful to hear them. There has been a terrible dearth of information about the real reduction in benefits, or the necessary increase in contributions. All we have had is the daft assertion that it is all good for contributors, and that paying in additional sums is somehow helping them to build up higher pensions for their old age.
I concede that a minority of pension schemes are final-salary schemes. Some, at least, have the ability to be in surplus. The National Association of Pension Funds conducted a survey, which showed that most of its members do not have such surpluses, but some do.
The bottom line is that millions of people investing in thousands of pension schemes will have been hit badly and immediately by the Budget. It is deceitful to try to disguise that. I use that word deliberately and with care.
On Budget day, the Government issued "The Pocket Budget", which was designed to be a summary or distillation of what we in Committee know as the Red Book. It is designed to make the Budget clear and easy to understand. It was published so that people could see how the Budget would affect them, and to make it understandable and accessible to people outside.
All are agreed, I think, that the pension fund change was central to the Budget. It is the unexpected tax change in the Budget and the largest one. When it is up and running, it will raise more each year than the windfall tax will raise in total.
The only reference in "The Pocket Budget" to that colossal tax change affecting millions of people is:
the Budget… makes other tax changes to encourage companies to invest profits in the future".
If that is not deceitful, I do not know what is, especially as it comes from a Government who go on about trust, openness and accountability.


Earlier on the same page from which I have quoted, the following is stated:
Openness. The Government is committed to building trust.
They could have started in the very booklet in which those words appear.
There is nothing in "The Pocket Budget" about the affect on pension funds. There is no figure. Of course there are plenty of figures to show how the money will be spent. Billions and hundreds of millions of pounds bandied about on the expenditure side of the Budget are explained in the booklet, but there is nothing about this huge tax-raising measure on pension funds.
Even the possibility of investment is a smokescreen. I read out the reference that supposes that the entire purpose of the pension fund tax changes is to encourage investment.
That is not true, because many companies will have to pay more into their pension funds now, and as a result will have less to invest. Companies, especially some of the larger ones that still have final salary schemes, will have to make up the lost income with their own contributions; so a company having to make up the deficit will have less money to invest in plant and machinery, not more. Therefore, even the excuse, or description, offered, incomplete and misleading as it is, is untruthful.
I hope that, when the Minister replies to the debate, which she said she would do with some care and at some length, she will agree that that publication is a disgrace. It is published at public expense, yet it is clearly designed to disguise rather than to illuminate the true nature of the Budget.
I have a practical suggestion about how the Government could compensate for the crime. They should certainly withdraw the "The Pocket Budget" from circulation, but does the Minister agree that the members of pension schemes, even at this late stage, have a right to know what has happened to them? The Government are promising a "right to know" Bill in the next Session, and they could start to implement their words now, by giving the members of pension funds the right to know what the Government have just done to them.
Indeed, if the law of Bristol, South is true, and more taxation really is good for pension funds, perhaps the Government will want to send a letter to all pension fund members explaining exactly how good the Budget was for their pension funds and their eventual pensions.
I hope that the Minister will take the suggestion seriously, and use the fact that pension funds write to their members regularly in any case. If the Government were to help with funding, I am sure that the funds could be persuaded—perhaps they should be told—to explain to all members what happened to them on Budget day.
There are several other unanswered questions about clause 19. One concerns the relationship between the clause and the state earnings-related pension scheme. More than 5 million people have opted out of SERPS, and many did so on a calculation of comparative advantage, having measured SERPS against alternatives such as taking out a personal pension.
A particular aspect of that calculation concerns the national insurance rebates that we made available to those who left SERPS and made alternative arrangements. In the Budget, the Government reduced at a stroke the attractiveness of the alternative personal pension, and that has rendered the original calculation invalid.
I am not talking about anyone being missold a pension; I am describing people who were properly, rationally and objectively advised that the SERPS scheme offered less good prospects than taking out a personal pension, helped by the national insurance rebates. The Government have now rendered that advice invalid.
In previous debates, we have heard that the Government will not increase the rebates. It is the Opposition's contention that the Government are guilty of misselling pensions on a colossal scale. I should like the Minister to return to that issue and explain how she can avoid the charge that she has retrospectively let down the millions of people who took a decision about their future pension provision on what has turned out to be a false prospectus.

Mrs. Liddell: It is rather rich for the Opposition to talk about pensions misselling, because they blatantly ignored the pensions misselling that took place when they were in government, and completely failed to take into account the fact that 600,000 people at or near retirement had been missold pensions. The people who were missold pensions under the aegis of the previous Government deserve an apology from the right hon. Gentleman.

Mr. Heatheoat-Amory: The misselling of pensions is always a serious matter, and the Conservative Government put in place a mechanism to find out what had happened and recompense the victims. I draw a clear and immediate contrast between that and what the Government are now doing deliberately to millions of people, in which the Minister seems to take some pride. I hope that, when she replies to the debate, she will deal with the national misselling of pensions scandal on the part of the Treasury Bench, which is taking place before our eyes.
The Government are attempting a pensions robbery on a scale that makes Robert Maxwell look like an amateur. It means less investment in British industry, lower pensions and higher contributions. Almost the worst of it is that they have tried to cover it all up by describing it as a minor tax change—something to do with company profits. That has now been exposed, and people know what has happened, so I look forward to hearing the Minister's apologies.

Yvette Cooper: I have a strange sense of deja vu, rising in the House to speak about pensions and tax credits all over again, but I shall resist the temptation simply to read from Hansard my contribution to the previous debate on pensions.
Again I find it strange, in discussing the tax credits, to listen to Conservative Members talking about their concern for the plight of future pensioners, when they did so little for the future pensioners who suffered so badly from the misselling of pensions. In their objection to the clause, they seem to be trying to claim two things—first, that the tax credit is good for the economy and for investment, so that to abolish it would be terrible for both, and secondly, that to take it away would be bad for future pensioners.
Both those claims are wrong. Is the tax credit really as good for the economy as Conservative Members profess? Consider a company that has made profits. What should


it do with those profits? Where should it invest them? Should it give them back to the shareholders, probably including a few pension funds, who are breathing down its neck? Or should it put the profits into investment, into expanding jobs and the future value of the company for those with shares in it, including those very pension funds?

Mr. Gibb: Does the hon. Lady not realise that it is not necessarily best for capital to remain within the company where the profits were earned? Surely it is better for the capital to go back into the capital market, and for independent assessors of the best use of it to decide where it would be best invested. That does not always mean that the profits should reside where they were made.

Yvette Cooper: That is an interesting claim, which several Conservative Members have made. They seem to argue that capital is always best used by the pension funds. In some cases, it may be. There may be good pension fund managers who are good at investing capital wisely—but there may also, as today's Office of Fair Trading report points out, be some who are not quite so good at making such decisions.
Equally, there may also be managers of companies who are good at making investment decisions. Others will not be quite so good. The problem with the tax credit is that it distorts the decision. Instead of allowing managers, pension fund managers and shareholders to make the best decisions about whether the money should go into investment, into dividends, or elsewhere, the Government and the taxpayer intervene, giving one group a subsidy to shunt the money out as dividends. That does not allow the managers simply to make a balanced decision about what is best.
It may be best to keep the money in the existing company; it may be best to take it out. We should at least let the managers make the best decision, according to the full information that they have about the state of the market at the time, rather than distorting the decision and letting the Government intervene to say, "We know what is best. We shall subsidise a particular use of that money." That is not a sensible or effective procedure for a Government who want to encourage investment and sensible decisions.
The tax credit has been used as a subsidy, and Britain pays out a huge proportion of its national wealth—double the proportion paid out by the Americans—in dividends. That is no wonder, when we have a tax credit that distorts the system. The Americans reinvest an awful lot more into their companies, and that might account for our low rate of long-term sustainable growth.
We have now allowed companies to take their own decisions about where best to spend their money. To balance the removal of the tax credit, we have cuts in corporation tax to encourage companies to make the best use of their resources. Our corporate tax rate is now lower than that of most countries in the industrialised world. That is a positive boost for investment.
Conservative Members argue that the measure is a massive blow to future pensioners, who will suffer terribly. That is a bizarre argument. They say that pension funds should inform all their current members of the

potential impact, but how is that impact to be calculated? Surely it depends far more on what happens to the economy over the next five, 10 or 20 years than on anything that happens in this Budget. We should look to the long term rather than trying to pluck figures out of thin air.
The biggest blow to pension funds and the corporate sector in the past five years was the recession, which could have been avoided but was escalated by the Conservatives' mismanagement of the economy. If we really want to protect the future of pension funds, we must take into account the effect of the overall economy on their performance.
Conservative Members seem to have few qualms about triggering another recession. Their position in the run-up to the general election was that the Bank of England did not need to take operational control of interest rates and that no tax increases or cuts in Government borrowing were necessary. They are not quite prepared to commit themselves, but they now seem to be saying that no interest rate increases were necessary.
Given the escalation in consumption, Conservative Members' refusal to act on all those matters would probably have encouraged the economy into another boom, followed by another recession. That would have done far more damage to British pension funds than anything of which they are accusing the Government.
I always wondered why Conservative Governments never seemed all that concerned about escalating into a boom or going into a recession, or about the long-term future of the economy. They did not seem to want to get us out of the boom-bust cycle. It is clear from Conservative Members' speeches today that they do not recognise the impact of the business cycle on pension funds. Presumably they also think that it has no impact on companies or on all the people who lose their jobs. We believe that that is a huge issue.
Labour Members believe that the boom-bust cycle that Britain has been in for so long has had a massive impact on pension funds. That is why the measures in the Budget are based on the long term, and not on the short-term quibbles that we have heard from Conservative Members today. I support the clause.

Mr. Malcolm Bruce: The hon. Member for Pontefract aud Castleford (Yvette Cooper) has rehearsed arguments that we have heard before. If the issue is so massive, one wonders why it did not manage to get into the Labour party manifesto in advance of the general election. That is what causes so much concern about the proposals and the way in which they are being introduced.
The hon. Lady has advanced arguments that many of us would accept as having some plausibility. They are a matter of opinion, and time will tell whether she is right, but the real concern is that, although the measure was not a manifesto pledge and the issue has not been widely debated, it is being rushed through in a matter of days before people have had a real chance to calculate the impact.
The shadow Chief Secretary has asked questions and expressed concerns that the Economic Secretary refutes. In a sense, that is logical. The right hon. Gentleman says, "We think this might happen"—and the Economic Secretary says, "We don't think so"—and the reality is that we all make a judgment about a dynamic situation the


consequences of which we cannot entirely foresee. That justifies the case for fuller consideration of the matter in the context of a general review of corporate taxation, to ensure that we get the balance right.
If I have a criticism, it is not that the measure is fundamentally wrong—it may or may not be—but that the Government are implementing it in such a hurry that nobody has a chance to consider the impact and get the questions aired and explored.
I can testify to the fact that the outside interest groups that are affected have barely had time to digest the complex impact. I have in my hand some suggested amendments that arrived too late to be tabled for debate today. They were sent by some of the people affected who want some answers, but they will not get them unless we manage to bring the matter up on Report, when there is strict timetabling.
I suspect that many people will begin to realise the implications only after the Bill becomes the Finance Act 1997. As has happened so often before, a new Finance Act in 1998 or 1999 will amend the mistakes. That is what we spend most of our time on in Finance Bill Standing Committees, year in, year out, because of the way in which we go about things.
The argument that it is simply a matter of changing the corporate tax system to make it more efficient and to encourage companies to retain profits that would otherwise be paid out in dividends and to invest is not as yet proven or provable. It certainly is not the whole answer, and no Labour Member is suggesting that it is. The hon. Member for Pontefract and Castleford was clearly advancing it only as one of the building blocks of her argument.
It is naive in the extreme to suggest that the measure is merely a change in corporate taxation: it is a form of personal taxation. Closing a tax loophole amounts to putting up taxes and means that people have to pay more. Effectively, therefore, it is a tax increase. As the exchange between the Economic Secretary and the shadow Chief Secretary demonstrated, the impact is not foreseeable and will be uneven. Some pension funds may be able to redistribute their funds in a way that reduces or eliminates the impact, and others may not.
The Government's arguments would have been more persuasive if they had not introduced the tax with effect from Budget day, which meant that there was no possibility of making any forward provision. I understand the reasons for that, but it means that even better management is required, to try to improve performance and offset any possible losses. The reality is that if, as the National Association of Pension Funds suggests, the measure could lead to an average increase of, say, 15 per cent. in contributions for people who are paying their own occupational pensions or personal pensions, with or without employers' contributions, it could easily be the equivalent of 1 p or 2p on the standard rate of income tax, which will be deducted from their salaries to bring their pensions up to the final salary calculations that they thought they were paying for.
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The Economic Secretary and other Labour Members will not be surprised to hear Liberal Democrats saying that it would have been more honest for the Government

to put up income tax rather than finding a back-door method of doing exactly the same thing unevenly. Effectively, that is what is happening. My worry is that the Government think that taxing the corporate sector does not affect individual citizens, when clearly it does. Certainly, the way in which this measure is being applied will do so. I might ask the Economic Secretary whether that is wise or whether a compensating adjustment is coming down the track.
The Minister for Welfare Reform, the right hon. Member for Birkenhead (Mr. Field), is charged with a comprehensive review of social security and pensions, which could clearly lead to a recommendation—most of us expect that it will—that individual citizens should make a substantial compulsory contribution to the pensions industry to achieve future top-up pensions to replace SERPS and provide care in the community and for people's care in their old age. As a consequence, the financial institutions will, potentially, have massive additional income. Perhaps they are being persuaded to back off and swallow this measure quietly because of the benefit that may come at a later date.
If that were the case, it would be regrettable, because those are real issues—one for the long term and one for the here and now. The here and now is that people will almost certainly have to find additional money to get the same pension benefit that they started paying for when the tax relief was built in.
I have some sympathy with the argument that tax reliefs are a distortion in the marketplace. I hope, however, that the Economic Secretary will not quite follow the line of argument of the hon. Member for Pontefract and Castleford, who has the ear of all sorts of people who influence policy and who suggests that all tax reliefs are a bad thing and a distortion and should be abolished. Or are only some of them bad?
What is a good or a bad tax relief is a subjective analysis, as is the effect of such reliefs. It has always been an accepted part of Government policy that tax and tax reliefs are not merely revenue-raising powers but are about altering people's behaviour—for example, to encourage saving or to discourage the buying of polluting equipment, and so on. Ministers put forward those arguments on many occasions. Indeed, the Chancellor of the Exchequer chose to argue that the massive and additional increase in the petrol tax in the Budget was an environmental measure. Of course, it was nothing of the kind—it was a revenue-raising measure. The argument used to justify it was that it would discourage the use of cars, which was good for the environment—the consequence is not arguable.
I hope that the Government do not believe that all tax allowances are equally bad. It would be helpful if they gave us a broad indication of which allowances they think are good and which bad, so that we can anticipate those that might be strengthened or introduced and those that might be abolished or reduced. We are all beginning to have to second-guess Government thinking.
This is a serious issue. I do not dispute that the Government have some valid arguments on their side, but introducing the measure at short notice, without full consultation and the opportunity for all the implications to be assessed and for those affected to get answers to their questions, was not wise, desirable or the right way to do things.
I hope that I can give the Government the benefit of the doubt—they thought that in their first Budget they had to do something that would bring in extra revenue, that this was the way to do it and that they were likely to get away with it now. We have on the record Ministers' suggestions that, in future, they intend to consult about tax changes. They intend to have a consultation on the future of corporate taxation. I hope that we will be able to have proper, informed debates in the House and with organisations and interested parties outside it, so that never again will a major tax change, which will bring in £5 billion a year for the foreseeable future, be forced through the House in a matter of days before any of us have had a full opportunity to assess its implications. Fundamentally, that is why we will vote against the clause.

Mr. Cranston: I should be more persuaded by the Opposition's claim that they are the pensioners' friend if my hon. Friend the Economic Secretary to the Treasury did not have to spend so much of her time clearing up the mess left by the previous Government because of the huge misselling of pensions. I should also be more persuaded if the Office of Fair Trading had not published a report this morning on the nature of the pensions industry and the extent to which it has not been adequately regulated.
Opposition Members have mentioned our manifesto in this and previous debates. I am prepared to give way if they can tell me how many of their 22 tax rises between 1992 and 1997 were mentioned in their 1992 manifesto—I suspect, none.
The background to this measure is this country's imputation system. We attempt to avoid the double taxation of dividends. Other countries do not have the same approach. ACT is a product of our system. For example, the United States does not have our imputation system.

Mr. John Swinney: Is the implication of the hon. Gentleman's opposition to double taxation that he wants to wipe away the double taxation treaties that this country has with a variety of other countries, to try to get some consistency in the taxation system?

Mr. Cranston: The hon. Gentleman completely misunderstands. The imputation system was designed to avoid double taxation in the sense of taxation when the moneys are in the hands of the company and then in the hands of shareholders when they receive dividends. That has nothing to do with double taxation treaties between different countries.
As the American experience demonstrates, our system is not universal or sacrosanct. The result of our imputation system, however, is that, in the case of pension funds and charities, a tax credit is paid. Base rate taxpayers do not have to pay anything in taxation on dividends because of the system, but pension funds get paid a credit.
As my hon. Friend the Member for Pontefract and Castleford so lucidly explained, that leads to a distortion in the way in which decision makers, such as pension funds, invest. They invest in United Kingdom equities to a greater extent than they would otherwise have done because of the tax credit. It also means—this is one of the themes of the Office of Fair Trading report—

Mr. Gibb: Will the hon. Gentleman explain his last statement, which I, and I suspect many hon. Members, do

not understand? Given that pension funds receive a tax credit on receipt of dividend income because the tax fund is not a taxable entity, so the interest and property income that they receive is not taxable, how can the imputation system give pension funds an incentive to invest in UK equities—all the income that the funds receive is tax-free?

Mr. Cranston: I am pointing out that the measure affects the portfolio decisions of pension funds. As we have seen in recent days, the speculation is that pension funds will turn from UK equities, for example, to commercial property, foreign equities or gilts.
The OFT report has underlined that the present system gives protection to inefficient fund managers. We know that fund managers have been able to produce good results and to charge high fees—I must be careful, because of the previous occupations of some Conservative Members—and we know also that fund managers have been able to earn extremely large salaries, even when particular funds have performed less well than funds that have merely tracked the FT stock exchange index. The current system leads to distortions in investment decisions taken by pension funds and to other inefficiencies.

Mr. Denzil Davies: I do not follow my hon. Friend's argument. It has already been said that pension funds used not to pay tax on dividends, rents from property developments or gilts. In future, they will pay tax on dividends but not on rent from property development and gilts. The anomaly, if there is one, lies in the fact that until now all the investment income of pension funds was tax-free. That has nothing to do with the imputation system.

Mr. Cranston: I find that intervention helpful. If my right hon. Friend reads the report of my speech in Hansard, he may follow my argument, which I hope and trust is correct.
The economic health of pension funds turns in the long run on the state of the economy. In other words, it turns on general economic conditions, including the stable long-term growth of the economy, and the Government have taken steps to ensure that there will be stable long-term growth. My hon. Friend the Member for Pontefract and Castleford has alluded to some of the measures that have been taken, such as the steps to ensure the operational independence of the Bank of England.
In assessing claims of the losses that pension funds will suffer, we must give some attention to how pension funds are valued, which is on a discounted cash flow basis. In other words, actuaries measure cash assets earned through dividends, which are discounted in accordance with ordinary accounting practice. There is growing pressure from international accounting groups to move away from that approach and to use market valuation, which is to value the assets and then to adjust them, for example, for inflation.
The present method of valuation means that the company that pays a dividend will be treated differently from the company that distributes capital in an authorised way, or which, for example, distributes to shareholders by buying back shares. It seems that the method of assessing the losses that pension funds suffer—there has been wild speculation about this—must be discounted to some extent because of the discounted cash flow method that is currently used in this country to value pension funds.
As far as final salary schemes are concerned, pensioners are protected. It is up to their employer to make up any shortfall as a result of these measures.
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The Budget introduces a cut in corporation tax. There are other benefits for corporations, which, to an extent, will allow companies to make up any shortfall that might occur as a result of these measures. In some cases, companies have been taking substantial pension holidays. They will have no difficulty in making up the shortfall.
Labour has said that, in the long term, there is a need for a new savings account for individuals which will build on the experience of TESSAs and PEPs, and will encourage long-term savings, which would be encouraged through tax relief. I very much look forward to the day when it will be introduced.

Mr. Gibb: It is always a pleasure to follow the hon. Member for Dudley, North (Mr. Cranston), who always makes my speeches sound interesting.
I was disappointed that the Government felt unable to accept the amendment that I tabled. The measure will cause additional alarm in the pensions industry, as it is still reeling from the disastrous effect of the abolition of credits on dividends. The additional concern—the right hon. Member for Llanelli (Mr. Davies) hinted at this—is whether the Government ultimately intend to tax other income received by pension funds, such as interest income and income from property. They have already broken the principle that pension funds should be tax-free vehicles. The Labour party may now think why not go the whole hog and tax everything that a pension fund receives. That would be a nice little earner to fund the Labour party's next spending bonanza.

Mrs. Liddell: Perhaps the hon. Gentleman will tell the Committee whether in his election manifesto he supported the previous Government's proposal to take away the tax-free contribution of employees' pension contributions. Does he believe that that is an effective way to deal with employees' pension contributions?

Mr. Gibb: There was no mention in my manifesto on that issue. I shall continue.
I refer hon. Members to clause 19(4), which provides a definition of income. It says:
'income", in relation to a pension fund, means income derived from investments or deposits held for the purposes of the pension fund".
Why does it say "investments" and "deposits" and not simply UK equities? After all, only UK equities are being taxed in the clause. Is this a Freudian slip, revealing the Government's long-term plans for pension funds? The industry, pensioners and people contributing to pension funds would appreciate a statement on that from the Minister—a statement that categorically rules out any intention further to tax pensions in the future, or at least during the lifetime of this Parliament.
The Government's decision to confiscate 11 per cent. of the value of pensions has already had a very damaging effect on confidence—the confidence that people feel when they are paying into a pension fund that was formerly considered a safe haven.

Mr. Cranston: Can the hon. Gentleman provide evidence to support his claim that the figure is 11 per cent?

Mr. Gibb: The same calculations have been used before. It can be assumed, for example, that about 55 per cent. of the assets of an average pension fund are held through United Kingdom equities. If 20 per cent. is applied to that figure, the total is roughly 11 per cent.

Mr. Cranston: All other things being equal.

Mr. Gibb: Yes.
As I was saying, pension funds were considered a safe haven, but they are now deemed a reasonable quarry for an ever-hungry Labour Government.
The Government have not given enough thought to the severe consequences of their decision to abolish tax credits on dividends. They have not thought about, for instance, the circumstances of someone who is self-employed or in non-pensionable employment and is already paying the maximum 17.5 per cent. of his net income into a personal pension fund. Thanks to this measure, that person will now need to increase his contributions to maintain the value of his pension, but the law prevents him from increasing his contributions beyond 17.5 per cent. if he is to receive a tax deduction. Why have the Government not raised the limit?
I note from page 46 of the Red Book that the Government have considered the impact that the Bill will have on companies. As is made clear in paragraph 2A.7, businesses will have to make higher pension contributions, and that will have an effect on corporation tax receipts. I can only say "Well done" to the Government—but what about the effect on local authorities? Why have the Government not made extra provision for higher local government contributions to employees' pension funds?
What will happen to councils that are already spending up to their capping limits? Should they cut services? Should they make people redundant? Or should they—as the Prime Minister suggested to the House, and as the Economic Secretary to the Treasury reiterated in the debate—simply rely on the fact that local government pension funds are not due for revaluation for a year or two, and do nothing about it until then? Is that the conclusion that the Government reached once they got round to considering the consequences of this measure? If so, I hope that no responsible local authority will follow that advice.
Why did the Government decide to allow higher-rate and basic-rate taxpayers to keep the tax credit on dividends, but refuse to allow non-taxpayers to reclaim it? Was it yet another deliberate attack on pensioners, two out of three of whom are non-taxpayers, or was it yet another unforeseen consequence of an ill-considered and ill-thought-out policy?
This one clause is the most damaging and far-reaching clause in the Bill. It will raise £3.95 billion in 1998–99 and £5.4 billion in 1999–2000. That is more than the


windfall tax raises, and it is an ever-recurring annual event. It is equivalent to a 3p rise in income tax. It will result in millions of people paying more into personal and occupational pension schemes, and in companies having to pay higher employer pension contributions. It will take 11 per cent. off the value of the nation's pension fund assets, and it will cause pension fund managers to switch whole swathes of investment—billions of pounds—out of equities and into other assets. As we discovered earlier, they will be transferring their money from authorised unit trusts, for instance.
That will force local authorities to sack staff or raise the council tax. It will undermine confidence in the sanctity of pension funds as a way of saving. It will increase the likely level of state dependency in the decades ahead, which will feature an ever-aging population. It vandalises one of the great successes of the past 18 years of Conservative government—the fact that the country has built up £650 billion in private pension fund assets.
The clause was introduced in a rush, as a wheeze to raise billions of pounds for future spending plans, but its unforeseen consequences are hugely damaging to pensioners and to the country as a whole. I urge hon. Members to throw it out.

Mr. Geraint Davies: I would not describe that speech as interesting.
Let us put this matter in context. Who is the pensioners' friend? What legacy did we inherit, and what does that legacy mean for pensioners? On 1 May, we inherited a situation in which Britain was falling down the skills league and the earnings per head league, so that, of the 15 member states of the European Union, only Portugal, Spain and Greece were below us. Was that good in the long term for pensioners investing in UK equities? UK plc became weaker and weaker under the Tories because of under-investment, year after year, in human and physical capital. The big challenge we faced was to put pensions on firm ground for the future.
We also inherited an enormous public sector debt, which we had to control. The Tory legacy meant future tax rises, which threaten future pensions. That is the real economics of the situation. The short-termist, accountancy approach taken by the Conservatives has taken Britain down the economic league of countries. In the present unstable consumer boom, the economy is disabled by undercapacity due to under-investment, and there is a propensity for inflation to increase and for interest rates to zoom up, which is not in the interests of home owners or of investors.
As for Conservatives being the pensioners' friend, we all know that, in the past, because of their economic mismanagement, they increased VAT on fuel, which hurt pensioners, and then tried to do it again. More than half a million people were missold pensions, and that problem was never sorted out. We need no lectures from Conservative Members, given their legacy of short-term chaos and long-term inadequacy.
I have said before and I shall say again that the Chancellor boldly created conditions in which pension funds could prosper. They can prosper only if UK plc is profitable in the long term. The delegation of responsibility for setting interest rates to take the risk

premium out of investment in Britain and thus reduce long-term borrowing rates was a great move for pensions. The reduction of corporation tax to the lowest level in Europe, which will make the United Kingdom attractive again for international investment, was another brilliant move, as was the tax reduction for small and medium-sized enterprises. Those changes will help the prospects of pension funds that invest in British industry.
What is advance corporation tax and where did it come from? In the first instance, ACT was a neutral measure to speed up the payment of corporation tax. Under the previous Government, tax credits were used to subsidise dividend payments to pension funds. On the face of it, that seemed very good, but it created a distortion. The judgment about what proportion of operating surplus should go into dividends—into the City—and what should be reinvested in research and development, future products and profitability was distorted in favour of the former. Other major trading nations, such as Japan, the United States and Germany, do not have such a distortion: they invest more in research and development, in innovation and in new products. It is not surprising that those countries are going up in the skills league.
We need to think carefully about the distorting effect of the subsidy and whether it is in everybody's interest, as has been asserted. I suggest that it is not. It may be in the short-term interests of some pension fund managers, but the history of the professionalism of pension fund management in Britain is not inspiring. Many pension funds and managers are characterised by excessive fees and charges and by salaries and bonuses to managers who are incapable of increasing their fund value above the FTSE average.
Most funds do worse than the average. I was on a pension fund board, and anyone who knows anything about the distribution of numbers will realise that that is possible. [Interruption.] Conservative Members laugh. Some of them are obviously in the industry. The board to which I referred employed some managers for a local authority who consistently failed even to track the average, and we changed them.

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Mr. Graham Stringer: Would my hon. Friend be surprised to learn that I was told by the chairman of one of Britain's leading manufacturers that he spent his time trying to hide from the City the amount of research and development that was carried out in that company? If the City had known about the large percentage of potential pension funds being spent in that way, it would have put pressure on him to reduce his company's research and development.

Mr. Davies: Unfortunately, I am not surprised to hear that. My hon. Friend's example is characteristic of the disgraceful activity throughout United Kingdom industry. Before I ran my own business and was in a multinational business, I found that there was an increasing propensity to have short-term financial returns. There was no longer an annual return, because every quarter the marketing and advertising spends, which were strategic investments, had to be cut to hit the City's requirements, its hunger for dividends. As hon. Members have said, such actions were carried out at the expense of long-term strategic investment.
Who is best equipped to make long-term strategic investment in research and development? Is it the people who create profits for companies in the first place, the managers and directors who invest their time, life, skills and energy fighting in competitive markets and delivering returns, or is it the City, which behaves in an accountancy fashion and just wants to drain the lifeblood from British industry?
It is obvious that a balance must be struck between dividends and research and development and reinvestment. The distorting effect of the subsidy has led to inadequate performance by many pension funds, and has allowed massive bonuses and the starvation of companies that want to invest and succeed. The balance is not right for our long-term economic prospects and, therefore for the economic well-being of pensions and pension funds.
The new Government bring with them a new culture to support the one that I have mentioned, which relates to investment, innovation and long-term thinking. It supports company directors and managers who want to succeed and does not simply respond sheepishly to the voice of the City.
In an earlier debate, Opposition Members spoke about the subsidies to private health care. People quoted industry sources which were subsequently shown to be inaccurate by reference to the Inland Revenue. In its own interests, the voice of the pension fund industry is prone to exaggerate the results of the Government's changes. We all know that the predictions about the impact on pension fund values derive purely from a calculation that is based on dividend flows which, in actuarial terms, do not stand up to scrutiny, because they will be unable to account for the likely capital growth of pension funds.

Mr. Gibb: How does the hon. Gentleman think the capital values of companies are calculated if not from their income flows?

Mr. Davies: It is now acknowledged by consultants in the industry that one has to give some idea of companies' future values in terms of stock market value and the like. That is not ascertained simply from the dividend flow. There have, on average, been large increases in stock value since the Labour party came to power, and those will continue if the Government create an environment, in terms of the Bank of England, research and development and corporation tax, in which we can expect rapid growth of investment and profitability in UK plc.
Future values should be factored in. Basically, the word on the street is that they will now have to be. The hon. Gentleman can use his somewhat simplistic arithmetic in this debate, but in a year or so, that will be inadequate and those changes will be made. Time will tell, but that is clearly the industry's view.
The simple fact is that, again, a small scatter of the Opposition have been cobbled together to talk about the short-term impact, warning that there will be victims, as if there were an election next week and they were still trying to pull themselves together. They are unable to confront the fact that the new Government, unlike the previous one during their 18 years of office, have a long-term policy that will deliver economic and social benefits for pensioners, other people and future generations.

Mr. Brooke: I am pleased to follow the hon. Member for Croydon, Central (Mr. Davies). To his credit, he has

been in the Chamber for much of the Committee, but he repeated the old canard about VAT on fuel hitting pensioners, when pensioners were the one element of the community that were protected from the tax's effect.
I spoke on this subject during the Budget debate. Yesterday, the Paymaster General rebuked us for not raising different points from those that we had made during the Budget debate, on Second Reading or, in the context of this debate, in the pensions debate. Plenty of hon. Friends wish to make new points, so I will confine mine, whether new or old, to three.
Before I do, may I say that it was a pleasure to welcome the right hon. Member for Llanelli (Mr. Davies), who I am sorry has now left the Chamber, to the debate? It is one of the signs of the new Government's overweening confidence that they thought that they could manage without the right hon. Gentleman, who was a distinguished Treasury Minister when Labour was in power before 1979.
First, the Government have given us remarkably little justification for their confidence that, if the payment of dividends is made less attractive, investment will be more likely. In one respect, I am in the Government's debt, as the subject is not one with which I have had to get to grips since I was a postgraduate student at Harvard business school 40 years ago. The baldness of the Government's confidence that their measures will have a particular long-term effect has driven me back this month to the academic literature, even if a fair amount of the latter comes from those modern seats of earning, the business schools.
I have also studied the 1994 Select Committee on Trade and Industry report on the competitiveness of UK manufacturing and industry. Interestingly, there were many fewer and much briefer recommendations in the chapter on the City and industry than in some of the other chapters, but it will not surprise the Committee if I recount that there were charges of short-termism, to which the hon. Member for Croydon, Central referred.
The Procrustean circumstances of the abbreviated and accelerated procedures in the Bill have still allowed me to read "Short-termism on Trial" by Professor Paul Marsh of the London business school, which was published by the Institutional Fund Managers Association, which is regularly quoted in the Select Committee's report, but which effectively finds the City not guilty of the charge as made.
I fear that, due to the accelerated procedures on the Bill, I have not been able to get hold of Mr. David Miles's "Testing for Short-Termism in the UK Stock Market", published in 1992 as Bank of England working paper series No. 4. I am sorry for that failure, but I blame the Government's business managers more than me. It is an omission, because, in paragraph 174 of the Select Committee's report, the argument over whether share prices properly reflected the value of long-term investment is primarily underpinned by Mr. Miles's study. I have already confessed that I have not had the opportunity to read it, but I have been advised that the working paper does not comprehensively underpin the conclusion that the Select Committee drew from it.
Interestingly, one immediate consequence of the Government's actions has been to drive funds out of manufacturing equities and into property, as the hon. Member for Dudley, North (Mr. Cranston) conceded.


I hope that the Economic Secretary will say why the Government are so confident about the effects of their measure. In particular, if the Government are wrong, the national price will be heavy.
My anxieties are compounded by the relative unfamiliarity of Ministers with their briefing under pressure. The words of the Financial Secretary have been quoted by my right hon. Friend the Member for Wells (Mr. Heathcoat-Amory) and others during the debate. My suspicion is that the Financial Secretary did not expand on the simple words she used because she would have got herself into deeper and unfamiliar water.
Even the Economic Secretary startled me when she was being cross-examined by Mr. James Naughtie on the "Today" programme on the subject of personal pensions in the context of this clause. She suddenly threw in the fact that pension funds were in surplus—which had nothing to do with the immediate price of eggs, in answer to the question asked by Mr. Naughtie.

Mrs. Liddell: I am surprised at the right hon. Gentleman's ungraciousness. I have always listened closely to his speeches. The point that I made specifically to Mr. Naughtie related to occupational pension schemes, which are a critical part of the mix in resolving pensions misselling. That is why I was discussing funds in surplus and the ability to rectify pensions misselling. I cannot believe that the right hon. Gentleman is comfortable in his soul with the way that the previous Conservative Government, in which he served, behaved on pensions misselling.

Mr. Brooke: The Economic Secretary is entitled to come back on such points, but the fact remains that she was deciding the agenda with Mr. Naughtie. She switched the argument to a subject on which she felt she was on safer ground—she was not responding to the question that he specifically asked her. [Interruption.] We can readily examine the transcript.
I am struck by the Government's confidence that companies that retain their earnings will do better. The Government are stripping the windfall tax from companies where investment is requested and regarded as important. Some Minister—I cannot remember who—said that the utilities could afford to pay the windfall tax out of their borrowings. I am struck by the difference between that use of borrowing and the Chancellor's golden rule, as expressed in the Budget, on what borrowing should be used for, at least in the public sector. I am left with the sense that the man in Whitehall knows best.
There is reasonable agreement that one effect will be to make final salary schemes less attractive and therefore drive people into money payment schemes. The irony is that those investing in money payment schemes are themselves penalised by the arrangements. I have never been enamoured of the phrase "double whammy", but the consequence of the Government's actions appears to be one. I suspect that the issues of short-termism and long-termism are ones that we will revisit in this Parliament. I hope that in the future, including tonight, the Government will afford us more argument and less asseveration than we have had so far.

Mr. Vernon Coaker: It is remarkable to be attending the Committee stage of the Finance Bill and to

hear Conservative Members pretend to be the friends of pensioners. During the recent election campaign, we discovered that pensioners were concerned about their circumstances and their prospects.
The Conservative party is portraying itself as the friend not only of today's pensioners but of future pensioners. However, the previous Administration's record—Conservative Members want nothing to do with that—show exactly what Conservative Members did for tomorrow's pensioners. Since 1979, the number of active members in occupational pension schemes has fallen. Moreover, hundreds of thousands of people were encouraged to leave occupational pension schemes and to take out personal pension schemes, for which many of them are still awaiting compensation.
Nevertheless, Conservative Members say that they represent future pensioners. Where were Conservative Members when pensions were being missold?

Mr. Shaun Woodward: Here we go again.

Mr. Coaker: The hon. Gentleman says that, but why should today's or tomorrow's pensioners trust Conservative Members, who failed so miserably in their obligation and responsibility to help pensioners when they had the power to do so? Conservative Members will have to answer that question.
Conservative Members have offered idle speculation on the consequences of the Budget's tax reforms and talked about Labour's scaremongers—but who are the scaremongers?

Lorna Fitzsimons: Does my hon. Friend agree that Opposition Members would not be scaremongering if they genuinely cared—as they profess to do—about pensioners? Conservative Members had 18 years in which to prove in deed and in word that they cared about pensioners, whereas VAT on fuel is a testament to their hypocrisy. Do you therefore agree that Conservative Members are shedding crocodile tears and are more in favour of pension funds?

The Chairman of Ways and Means (Sir Alan Haselhurst): Order. The hon. Lady is not conducting a conversation with one of her colleagues; she is addressing the Chair.

Mr. Coaker: I thank my hon. Friend for her intervention, because she has made point that I was trying to make. When Conservative Members were in power, they did nothing to protect future pensioners. As she said, now that we have a Government who are determined to take action for the benefit of the entire community, Conservative Members disagree and offer idle speculation to frighten people and to undermine the Government's proposals.
Much of the basis of the argument offered by Conservative Members reminds me of my time at university, when I was studying economics. Our economics lecturer stood in front of the class and drew models, saying, "If you keep this, this and this the same, the outcome will be that." We asked what would happen if we changed one part of the formula, and he said, "You can't change one of the variables, because that would


spoil it." Conservative Members refuse to accept the Government's argument that the value of pension funds is determined not only by the amount of money paid into them but by many other variables.
My hon. Friend the Economic Secretary to the Treasury has said in this debate that pension fund values are determined not only by the income paid into them but by economic confidence and growth and generally by how people feel about the economy. All those factors will affect pension fund values and prospects.
If Conservative Members want to lower pension fund values, they should continue talking down pension funds and trying to undermine economic confidence. Future pension fund values, on which so many workers rely, will be affected by such activities.
Like all my hon. Friends, I support the Government's measures. They are designed to encourage investment and to do something to tackle the blight that we see all around us. We have a new Government, and it is incumbent on Conservative Members to remember that the new Government have different priorities and are determined to do things differently.
The tax changes outlined in the Budget, including the ACT proposals, are part of a package that aims to serve the whole community and put people back to work. It is about investment in the economy and about rewarding that investment rather than rewarding speculative gain.
Finally, I remind hon. Members that what the Labour party promised during the election campaign, and what the Labour Government are now delivering, is a fairer tax system which encourages and rewards investment and which, through that investment, generates a fairer society in which there are opportunities for all.

Mr. Woodward: You may not be surprised to hear, Sir Alan, that I do not intend to take up the invitation issued by the hon. Member for Gedling (Mr. Coaker) to share his views.
I believe that clause 19 should be withdrawn. It goes hand in hand with a Budget which is, by and large, full of carelessness and broken promises, although I admit that in that respect this clause is something of a surprise. Throughout the election, and in the run-up to it, we were treated to a series of promises by the Prime Minister and the Chancellor of the Exchequer. They told us, quite fairly, that there would be windfall tax, and we can find it in their deliciously framed manifesto and prospectus. When pressed on whether there would be other tax increases, the answer was, "Absolutely not—we have declared all our taxes and you will find in our manifesto everything we will do."
In the Chamber on Tuesday, however, my hon. and learned Friend the Member for Harborough (Mr. Garnier) repeatedly pressed the Financial Secretary to assist him in his inquiries, trying to find a reference in the Labour party's prospectus to the abolition of the ACT credit for pension funds. The Financial Secretary seemed to be having some difficulty answering his question. I believe that the Financial Secretary did not answer his question. Indeed, I would go so far as to suggest that she probably could not answer his question, because there is no such proposal in the Labour party manifesto—if there is, I shall be more than happy to give way to the Economic Secretary so that she can tell me where I can find it.
Out of nowhere, the Labour party will produce a bonanza to fund its spending programme by abolishing the ACT credit. The aim is, of course, laudable. There cannot be one hon. Member who does not think that one of the most important tasks of anyone in politics is to create employment—[Interruption.] I am sorry to see the hon. Member for Dudley, South (Mr. Pearson) shaking his head as I suggest that our task should be to create employment. He could learn a few lessons by looking back at what the previous Government did to create employment.
Every other European country has rising unemployment but, just today, we have celebrated yet another fall in unemployment because of Conservative policies of the past few years. Those policies have created real jobs, not phoney or subsidised jobs that will disappear when the subsidy goes. If the hon. Gentleman wants to learn how to create real jobs, I suggest that he looks hard at the work of the past few years.

Mr. Geraint Davies: Will the hon. Gentleman accept that only one in six of the new jobs created in the final year of his party's failed Government were full-time jobs and that the rest offered poorly paid, part-time or temporary work which was inherently insecure and in which, in many instances, people were stripped of their pension rights and other benefits? Those are not real jobs—they are bogus jobs.

Mr. Woodward: The hon. Gentleman asked me simply whether I agree. No, I do not.
The aim of the clause—welfare to work—is laudable, but the means are crude.

Mr. Stringer: Will the hon. Gentleman give way?

Mr. Woodward: No, I shall not give way for the moment. At best, the clause is careless; worse than that, I believe that it will produce instability in the economy, depriving it of investment and creating uncertainty—not just for the pensions industry, where there is huge uncertainty as a result of the Budget, but for pensioners. I am sure that hon. Members on both sides agree that one of our most important tasks is to provide certainty for people in their old age and as they approach old age. I hope that Labour Members agree that the building up of more than £650 billion of pension funds in the United Kingdom—whomever we give the credit to—is a considerable achievement and reflects well on the country.

Mr. Davies: The hon. Gentleman has just asserted that the best prize that we could give the British public is certainty. Is it not the case that the only certainty that the previous Government brought was uncertainty? All that we saw was a cycle of boom and bust: in the housing market, in recession and unemployment—the list goes on. The Budget will bring about stability, certainty, long-term investment, security, wealth, prosperity and fairness for the British people for the new millennium.

Mr. Woodward: The hon. Gentleman will not be surprised that, yet again. I do not agree with him. I am sorry to disagree with him, but I am afraid that I have to.
There was huge uncertainty a week before the election when the right hon. Member for Sedgefield (Mr. Blair) went around the country terrifying pensioners. He ran


around saying that the Tories were going to scrap the basic state pension. He was challenged for evidence. Did he find it? No, yet he went on repeating the scare. I do not believe that anybody should scaremonger and frighten old people for the sake of it. The Conservatives want to talk about the clause in detail because, most of all, we want proper consultation before such measures are taken.
It is ironic that the right hon. Member for Sedgefield made those claims about the future of pension. We have a Labour Government—

Mr. Davies: Will the hon. Gentleman give way?

Mr. Woodward: No, I will not give way. I have given way to the hon. Gentleman twice.
The Government are robbing not the few, but the many. The only equitable aspect of this careless tax is that it will hit every fund and everyone. Sooner or later we shall all, like Mother Hubbard, find ourselves going to the cupboard only to find it bare—emptied by the Labour Government as they look for every opportunity to take money from success.
The accountancy firm Kidson Impey said of the Chancellor in The Independent on 3 July:
What he's really done is to steal from every person and business who pays into a pension.
The chairman of the Association of Consulting Actuaries, which represents pension fund consultants, said that abolishing the ACT credit would lead some companies, especially small companies, to abandon sponsorship of occupational pension schemes. He said:
Any employer considering introducing or extending occupational pensions may now be dissuaded from doing so.
He went on:
This move is in direct opposition to the Government's stated aim of increasing private funded pensions to reduce reliance on the state.

Mr. Ivor Caplin: Will the hon. Gentleman address the important issue of pension holidays? I have heard nothing so far in the hon. Gentleman's eight minutes—or from any of his Conservative colleagues—about the massive pension holidays that took place. That money could have been reinvested to benefit pensioners, but no, the companies had the right to pension holidays.

Mr. Woodward: The hon. Gentleman is obviously excited about what I have said and what might be coming in my speech. He will indeed find that I shall refer to other matters concerning pensions.
Firm after firm report that this careless clause is damaging and vindictive. It is planned for short-term gain but will do long-term harm. Just at the time when Britain is emerging as Europe's most successful country in building up pension provision, along comes the Chancellor and whack—he raids the kitty.
To be charitable, the Government—or some Ministers—may not have not quite understood the impact. Obviously, the Financial Secretary to the Treasury does not quite understand. On 3 July, she told us:

The measure is good for pensions and pensioners, not bad for them. Furthermore, the existence of pension fund contribution holidays demonstrates that there is scope to absorb the measure.
Hon. Members may be forgiven for being a trifle nervous about the hon. Lady having such responsibility, given her failure to comprehend not how good the measure is for pensions but just how bad it is for them. I will give some examples of how bad it is.
ICI says that the cost of the shortfall to its company alone will be tens of millions of pounds. The Post Office fund reckons that the cost of abolition is some £130 million. To take an individual—Labour Members spend a great deal of time talking and thinking about individuals—a 35-year-old who has accumulated a fund of £20,000 on contributions of £1,000 a year will now pay an extra £315.10 a year to make up the shortfall. That is an extra £26.26 a month. Is that good or bad? The Financial Secretary says that the measure is good for pensioners, but to me that extra cost does not seem all that good.
Chantrey Vellacott has shown that, on average, the 19 million members of company or personal pension schemes—probably even more members than there are of the Prime Minister's fancy club in Sedgefield—will require an average increase in contributions of £190 a year. Is that good or bad? It is bad.

Sir Teddy Taylor: Is my hon. Friend aware of the huge problems and worries facing local councils such as Essex county council, which has found and announced only yesterday that it will have to spend several millions of pounds extra on cut services? Is it not rather silly to engage in politics when real problems are facing real councils in providing real services to people, including pensioners and poor people? Would it not be better to stop talking politics and realise that local councils are facing huge problems due to this silly scheme?

Mr. Woodward: My hon. Friend is of course correct and makes a very important point. It is a great shame that Labour Members, in their precipitate haste to hit the ground running, have not considered the impact of the measure on local authorities.
I find the Financial Secretary's conclusion that the Budget will be good for pensioners extraordinary. It demonstrates a fundamental lack of understanding of the economics of the pensions industry and a careless disregard for pensioners themselves.

Mr. Caplin: That is rubbish.

Mr. Woodward: I am sorry that the hon. Gentleman thinks that that is rubbish. Pensioners will not think so in years to come when they find that the money that they thought was there is not there because the hon. Gentleman's party has raided the store.

Lorna Fitzsimons: Will the hon. Gentleman give way?

Mr. Woodward: I will not.
As individuals up and down the country start to calculate just how much money Labour is robbing from their pockets for the future, they will seek out those responsible and those who patronisingly told them, as the Financial Secretary did:


The measure is good for pensions and pensioners, not bad for them.
The Financial Secretary of course has a defence. She said:
the existence of pension fund contribution holidays demonstrates that there is scope to absorb the measure."—[Official Report, 3 July 1997; Vol. 297, c. 507.]
If we look at the figures, however, as my right hon. Friend the Member for Wells (Mr. Heathcoat-Amory) did earlier in the debate, we see that three quarters of UK pension schemes are money purchase schemes. They have no surplus. Unfunded, final salary schemes such as the civil service and health pension schemes also have no surplus. Just like the smash and grab raid on the utilities, with the tax on water, gas and electricity, Labour now turns to rob the pensioners. The Chancellor called the Budget a people's Budget. Does he not realise that pension fund money is the people's money?

Lorna Fitzsimons: The hon. Gentleman mentioned certainty for pensioners, and we agree with the need for that, so would he care to comment on the lack of certainty that 18 years of Tory government gave to those people who relied on the constant value of the state earnings-related pension scheme? It was halved in those 18 years, when the Tory Government had responsibility for establishing the certainty that the hon. Gentleman thinks is so important for pensioners.

Mr. Woodward: The hon. Lady knows full well that, after those 18 years, pensioners were considerably better off than they were when we took office. We should remember that when Labour was last in government it froze the state pension for two years in a row. This time, within eight weeks, it is taking more money from pensioners.

Lorna Fitzsimons: Will the hon. Gentleman give way again?

Mr. Woodward: I will not.
The Financial Secretary believes that there is a lot of surplus about. There may be a lot about, but why? It is because the Conservative Government created financial conditions under which companies in Britain could do well, and British pension funds have done well.
What do we see now that the Labour party is in government? We see old Labour. Its attitude is, "If it's successful, tax it." Its motto, amply demonstrated in the Budget, is, "If it is a company that should succeed, tax, tax and tax again." As a result, millions of pensioners will be markedly damaged by the tax on savings and investment.
Much has been made by Labour Members, including the hon. Members for Manchester, Blackley (Mr. Stringer) and for Croydon, Central (Mr. Davies), about investment in research and development, but this is not a Budget for investment. The National Association of Pension Funds has said:
companies which pay dividends are more likely to invest in research and development. The research and development of dividend-paying companies is also significantly higher than that of non-dividend paying companies.
The idea that UK companies sacrifice research investment in favour of excessive dividend payments should be set aside in the face of that research, unless Labour Members wish to dismiss the work of the National Association of Pension Funds.
The measure will take an extra £50 billion of pension contributions in the next 10 years—money that would otherwise have gone into research and development, investment and creating real jobs, not subsidised employment schemes that will end when the subsidy goes. Far from allowing more money for investment, the measure will hit companies hard. Companies with final salary pension funds will increasingly be required to find additional contributions from businesses, further diverting funds from investment. That will be the case for funds that are not now in surplus and, in the longer term, in most cases as fund surpluses are used up.
The clause is short-termism run amok. Labour has seen a pot of gold to fund its new culture—as Labour Members called it earlier—its new Jerusalem. With all the feather-like delicacy of a sledgehammer, Labour has smashed the pot and grabbed the gold in the hope of playing Robin Hood. However, the only Robin in this story is the robbin' of the savings of every pension fund in the land by Labour.
We have seen the twinkle in Labour Members' eyes and their excitement as they spot the potential to raid the money from pension funds, but the tax has all the properties of a Paul Daniels magic show. Like the magic candle on a child's cake, no sooner have they robbed the funds of £5 billion one year than they will rob them of £5 billion the next. The Labour Government are clearly exposed as serial raiders, but they will discover themselves to be false raiders.
The money is set aside for real long-term investment, a subject about which Labour Members do not care, understand or worry about much. In words and rhetoric, in manifestos, prospectuses and little handouts for the Budget, they care—but as we have seen so ably demonstrated in the Budget and in this specific clause, they do not understand the substance.
When the Labour Government came to power, they said that they would hit the ground running. The only thing that the Government have proved that they will hit running are the elderly. The brutal raid on the pension funds will cause lasting damage to our economy.
Is it not ironic that, wherever they turn, the Government say, "Let's have a review"? Wherever they move, they say, "Let's have a working party." But on this one issue, was there a working party? Was there a review? Was it in their manifesto? No. Why not? Why no consultation? Why no mention in the manifesto? The Association of British Insurers has sensibly called on the Chancellor to put the proposal into abeyance pending consultation. The association has rightly pointed out that it is a major change to taxation policy in the corporate sector. It is a significant change in taxation in our country. What is to be lost by proper consultation? The Government believe in reviews and in working parties, so why is there no working party on the proposed change? Why is there no review?
The clause abolishing the ACT credit is full of potential problems. One cannot ignore the advice from all the bodies in the City that have built up successful funds. To do so is wilfully negligent.
In closing, I ask the hon. Lady to bear in mind the request—not from Conservative Members, but from those who have successfully created pension funds—to put the proposal into abeyance until full consultation has taken place.

Mrs. Liddell: I am glad to have the opportunity to respond to the debate. I should tell the hon. Member for Witney (Mr. Woodward) that the Carnegie medal for children's literature was awarded today. I get the impression that that is what his contribution was aimed at achieving. Given that he is a former director of communications for the Conservative party, he has obviously made a career out of saying things that he does not believe.
There has been a more mature debate this evening than we have had on previous evenings. Perhaps the playmates are engaged elsewhere, but we may see them before 10 o'clock.
There has been a brittleness about some of the contributions of distinguished Conservative Members. I am thinking in particular of the shadow Chief Secretary to the Treasury, the right hon. Member for Wells (Mr. Heathcoat-Amory), and the right hon. Member for Cities of London and Westminster (Mr. Brooke), both of whom are distinguished Members in their own right. I recognise that I am a junior Member and it is not for me to criticise, but I have to admit that I feel that there is still an inability to come to terms with the scale of the defeat that the Conservative party suffered on 1 May. I was surprised at some of the remarks that were made.
I shall deal with the points raised by the shadow Chief Secretary—[Interruption.] I see that some more hon. Members have joined us. That adds to the atmosphere in the Chamber. The right hon. Gentleman referred to "The Pocket Budget". In another context, the word "sophistry" was used—and it was the word that came to mind in the middle of his speech. I shall return to that in detail later.
If we look at the substance of the clause, we see that its purpose is to take away pension funds' ability to obtain payment of a tax credit, with effect from 2 July. That is part of a two-stage process under which payable tax credits will be removed from the tax system in April 1999.
As I said at the beginning of the stand part debate, the purpose of the change is to remove a damaging distortion from the system while reducing levels of corporation tax. Several Opposition Members have referred to Labour saving up for a spending wheeze in the future. What utter nonsense. The move is part of a Budget that has significantly reduced corporation tax, permitting a better climate for business. I shall develop that idea later, when I talk about what was said by the right hon. Member for Cities of London and Westminster.
9.45 pm
My hon. Friend the Member for Dudley, North (Mr. Cranston) referred to the imputation system. As my hon. Friend pointed out, the tax credit system is designed to mitigate the double taxation of distributed company profits—once at the company level and again in the hands of the shareholder. That is what the system does, continues to do and will still do after the 1999 changes.
However, the old system that we seek to change went further. Some shareholders, such as pension funds, could claim payment of the tax credit. That means that the system did more than relieve double taxation; it effectively reduced the rate on company profits when those profits were distributed. That meant, among other things, that there was an incentive to invest in companies that distributed a high proportion of their profits rather than in those that reinvested profits to build up their capital.
The right hon. Member for Cities of London and Westminster talked about his time some years ago at the Harvard business school. I wish that I had had the opportunity to study there, but I shall refer him further back, to the days of the industrial revolution.
After the industrial revolution, there was a decline in Britain's industrial performance because subsequent generations did not reinvest their profits. Basically, the present change is designed to create a climate in which companies can again, of their own volition, through decisions based on their own judgment, reinvest their profits.
We have heard numerous references to short-termism, but most graphically and eloquently from my hon. Friend the Member for Pontefract and Castleford (Yvette Cooper). The climate of short-termism has been the cause of considerable concern to people in British business.
The right hon. Member for Cities of London and Westminster, as a defender of the City of London—in my role as Economic Secretary I, too, have cause to defend the City—says that it does not necessarily breed short-termism. I must tell him that the pressure on companies to maximise dividend payments and the pressure that the tax system puts on them to distribute their profits in payments to pension funds breed a forced short-termism in the performance of company executives and boards. That in itself is a significant distortion.
The right hon. Member for Wells said that £5 billion would be lost to pension funds. His figures are wrong. The figure that I have is about £3.6 billion. I think that the right hon. Gentleman may have taken into account shareholders' dividends, some of which are not distributed in the United Kingdom, at the same time. That is the only conclusion that I can draw from the figures he used.
The right hon. Gentleman's peroration was not in character, as he is said to have a reputation for intellectual honesty. I can only conclude that, for want of a better argument, he has stooped to trying to frighten people who are saving for their pensions. That is especially offensive, in view of the misselling of pensions that took place on such a massive scale, without correction, during the life of the Government of which he was for so long a member.
It is important that pensioners have a clear view of exactly what the proposals are. The previous Government made a similar change in 1993, reducing the rate of tax credit from 25 per cent. to 20 per cent. Last year, they took action against some of the more blatant exploitation encouraged by the distortion of payable tax credits by removing them from share buy-backs and certain special dividends.
I am tempted again to refer to the remarks made by the right hon. Member for Hitchin and Harpenden (Mr. Lilley), who pointed out that the Government had sought to raise revenue in a way that did the least economic damage, but I will resist the temptation to develop that point. The previous Government did not use any of the money that was raised to cut the rate of corporation tax, as we have done.
The hon. Member for Gordon (Mr. Bruce) asked why we were making the change now: it is because, according to the Government Actuary's assessments, many pension funds are in surplus by as much as £50 billion. In combination with the current high level of the stock market, that means that there is a much greater opportunity for funds to absorb the change without any great difficulty.

Mr. Swinney: Will the Economic Secretary give way?

Mrs. Liddell: I shall give way to the hon. Gentleman in a second, because I know that he did not get a chance to contribute to the debate.
I reiterate the point that pension funds should benefit substantially from the improvement in company performance as a result of the Budget.

Mr. Swinney: I am grateful to the Economic Secretary for giving way. There is undeniably a surplus in many pension funds. Can she give the Committee a guarantee that there are no solvency questions over any pension funds that may be affected by the proposed change?

Mrs. Liddell: I believe that the hon. Gentleman is referring to the minimum funding requirement for pension funds. The vast majority of funds are comfortably above that, and my right hon. Friend the Secretary of State for Social Security keeps a close watch on such matters, so we are alert to any possible problems.
The Government did not take the decision on the abolition of tax credits lightly. Several references have been made to our election manifesto. I am sure that Conservative Members have copies of it—indeed, I can see that the hon. Member for Witney has one in front of him—and if they would care to turn to page 13, they will see that the penultimate paragraph says:
We will review the corporate and capital gains tax regimes to see how the tax system can promote greater long-term investment.
That is a clear sign of the Government's intention, which was flagged up two years before the general election by my right hon. Friend who is now Chancellor of the Exchequer.
The hon. Member for Gordon spoke of the possibility of compensating adjustments in the comprehensive review of pensions. It is not my place to refer to what the Under-Secretary of State for Social Security, my hon. Friend the Member for Southampton, Itchen (Mr. Denham) is doing in that comprehensive, long-term review. I am sure that hon. Members in all parties will acknowledge that it could not be in better hands.

Announcements will be made in due course. I am grateful to the hon. Member for Gordon for acknowledging that the Government have valid arguments.
My hon. Friend the Member for Dudley, North made a good point about how pension funds are valued, which is an area of considerable debate both here and internationally. As he said, valuation is often by reference to discounted cash flow. A number of commentators—not least in the press today, as a consequence of the Office of Fair Trading report—have said that that method is outdated. Indeed, in the United States, much more regard is given to share values.
A number of companies are considering, with their fund actuaries, whether the basis of valuation should be changed. There is certainly an argument. The time has come for companies to consider seriously the basis of valuation.
The hon. Member for Bognor Regis and Littlehampton (Mr. Gibb) referred to the tax privileges of pension schemes. Whenever I intervened to ask him whether he had referred in his manifesto to cutting tax relief on employee contributions, he seemed confused about what I was getting at. The party of which he is a member—indeed, the previous Government—was going to cut the tax relief on employee contributions to occupational pension schemes. My right hon. Friend the Chancellor of the Exchequer said clearly during his Budget statement that this Government will not proceed with that move because we believe that it was a wrong decision on the part of the previous Government.
The hon. Member for Bognor Regis and Littlehampton also referred to the fact that pension funds are tax vehicles. Pension funds' tax exemptions have always been limited and there is a good reason for that. For example, they have never been tax exempt on trading income or other income from investments or deposits. If funds have excessive surpluses, they are also taxable on excess income. They are not, however, being taxed on dividends. We are stopping a subsidy received from the Exchequer.
On a number of occasions this evening we have discussed pensions misselling. I do not contend that it can possibly be right that the victims of pension misselling should, by their own tax payments, be subsidising pension funds. They really are caught in what the right hon. Member for Cities of London and Westminster described as a double whammy.
The hon. Member for Bognor Regis and Littlehampton also made a number of points about the Red Book. It allows for extra pension contributions by companies because that affects the yield from corporation tax. Local authorities do not pay tax, so there is no similar need to refer to them on page 46 of the Red Book.

Mr. Gibb: rose—

Mrs. Liddell: I shall give way if the hon. Gentleman will be brief. I am conscious of the time.

Mr. Gibb: I realise that, but the point is that if the Government have made an allowance for companies to pay higher contributions into their pension funds, why have they not somewhere else in the Red Book, on the


expenditure side, made allowance for the fact that local authorities will have to make extra contributions to their pension funds?

Mrs. Liddell: I refer the hon. Gentleman to the debate on local authorities that we had about two hours ago. I do not want to go over that ground at the moment, because I am anxious to answer the other points raised by Opposition Members.
The right hon. Member for Cities of London and Westminster made claims about windfall tax damage. As my hon. Friend the Paymaster General made clear in a number of debates on the Budget and the Finance Bill, the Government believe that liable companies can find the means to pay the windfall tax without needing to curtail investment.
To return to the general point that the Government and I have made throughout this debate, our purpose in the clause is to remove a significant distortion. We want to create the sort of system in which companies, particularly those that might be involved in investments that do not necessarily have a high return at the beginning, for example in new technology or research and development, can fund those investments from their own resources. That is a sound way for companies to make their business grow.
In effect, that is what lies at the heart of the change that the Government are introducing in the Bill. We are committed to ensuring that, as Britain enters the 21st century, our companies have the revenue that will allow them to invest for the long term. That is one of the reasons we have reduced the level of corporation tax from 33 to 31 per cent., and from 23 to 21 per cent. for small companies. We want to move away from short-termism, a move that will benefit business generally. I commend the clause to the House.

Question put, That the clause stand part of the Bill:—

The Committee divided: Ayes 334, Noes 182.

Division No. 61]
[9.59 pm


AYES


Abbott, Ms Diane
Blears, Ms Hazel


Adams, Mrs Irene (Paisley N)
Blizzard, Bob


Ainger, Nick
Blunkett, Rt Hon David


Ainsworth, Robert (Cov'try NE)
Boateng, Paul


Allen, Graham (Nottingham N)
Borrow, David


Anderson, Janet (Rossendale)
Bradley, Keith (Withington)


Armstrong, Ms Hilary
Bradshaw, Ben


Ashton, Joe
Brinton, Mrs Helen


Atkins, Charlotte
Brown, Rt Hon Nick (Newcastle E)


Austin, John
Brown, Russell (Dumfries)


Banks, Tony
Browne, Desmond (Kilmarnock)


Barnes, Harry
Buck, Ms Karen


Barron, Kevin
Burden, Richard


Battle, John
Burgon, Colin


Beard, Nigel
Butler, Christine


Beckett, Rt Hon Mrs Margaret
Byers, Stephen


Bell, Stuart (Middlesbrough)
Caborn, Richard


Benn, Rt Hon Tony
Campbell, Alan (Tynemouth)


Bennett, Andrew F
Campbell, Mrs Anne (C'bridge)


Benton, Joe
Campbell, Ronnie (Blyth V)


Best, Harold
Campbell-Savours, Dale


Betts, Clive
Canavan, Dennis


Blackman, Liz
Cann, Jamie





Caplin, Ivor
Gerrard, Neil


Casale, Roger
Gibson, Dr lan


Caton, Martin
Gilroy, Mrs Linda


Cawsey, lan
Goggins, Paul


Chapman, Ben (Wirral S)
Golding, Mrs Llin


Chaytor, David
Gordon, Mrs Eileen


Chisholm, Malcolm
Graham, Thomas


Clapham, Michael
Griffiths, Jane (Reading E)


Clark, Dr Lynda (Edinburgh Pentlands)
Griffiths, Nigel (Edinburgh S)



Griffiths, Win (Bridgend)


Clark, Paul (Gillingham)
Grocott, Bruce


Clarke, Charles (Norwich S)
Grogan, John


Clarke, Eric (Midlothian)
Gunnell, John


Clarke, Rt Hon Tom (Coatbridge)
Hall, Mike (Weaver Vale)


Clarke, Tony (Northampton S)
Hall, Patrick (Bedford)


Clelland, David
Hamilton, Fabian (Leeds NE)


Coaker, Vernon
Hanson, David


Coffey, Ms Ann
Harman, Rt Hon Ms Harriet


Cohen, Harry
Heal, Mrs Sylvia


Coleman, Iain (Hammersmith)
Henderson, Doug (Newcastle N)


Colman, Tony (Putney)
Henderson, Ivan (Harwich)


Connarty, Michael
Heppell, John


Cook, Frank (Stockton N)
Hesford, Stephen


Cooper, Yvette
Hewitt, Ms Patricia


Corbett, Robin
Hill, Keith


Corbyn, Jeremy
Hinchliffe, David


Corston, Ms Jean
Hoey, Kate


Cousins, Jim
Home Robertson, John


Cox, Tom
Hood, Jimmy


Cranston, Ross
Hoon, Geoffrey


Crausby, David
Hope, Phil


Cryer, Mrs Ann (Keighley)
Hopkins, Kelvin


Cryer, John (Hornchurch)
Howartti, George (Knowsley N)


Cummings, John
Howells, Dr Kim


Cunningham, Jim (Cov'try S)
Hoyle, Lindsay


Cunningham, Rt Hon Dr John (Copeland)
Hughes, Kevin (Doncaster N)



Hurst, Alan


Curtis-Thomas, Mrs Claire
Hutton, John


Dalyell, Tam
Iddon, Dr Brian


Darling, Rt Hon Alistair
Illsley, Eric


Darvill, Keith
Ingram, Adam


Davey, Valerie (Bristol W)
Jackson, Ms Glenda (Hampstead)


Davies, Rt Hon Denzil (Llanelli)
Jackson, Helen (Hillsborough)


Davies, Geraint (Croydon C)
Jenkins, Brian (Tamworth)


Davies, Rt Hon Ron (Caerphilly)
Jones, Barry (Alyn & Deeside)


Davis, Terry (B'ham Hodge H)
Jones, Ms Fiona (Newark)


Dawson, Hilton
Jones, Helen (Warrington N)


Dean, Mrs Janet
Jones, Ms Jenny (Wolverh'ton SW)


Dewar, Rt Hon Donald



Donohoe, Brian H
Jones, Jon Owen (Cardiff C)


Doran, Frank
Jones, Dr Lynne (Selly Oak)


Dowd, Jim
Kaufman, Rt Hon Gerald


Drew, David
Keeble, Ms Sally


Drown, Ms Julia
Keen, Alan (Feltham & Heston)


Dunwoody, Mrs Gwyneth
Keen, Mrs Ann (Brentford)


Eagle, Angela (Wallasey)
Kemp, Fraser


Eagle, Maria (L'pool Garston)
Kennedy, Jane (Wavertree)


Efford, Clive
Khabra, Piara S


Ellman, Ms Louise
Kidney, David


Ennis, Jeff
Kilfoyle, Peter


Etherington, Bill
King, Andy (Rugby & Kenilworth)


Fatchett, Derek
King, Ms Oona (Bethnal Green)


Field, Rt Hon Frank
Ladyman, Dr Stephen


Fisher, Mark
Lawrence, Ms Jackie


Fitzpatrick, Jim
Laxton, Bob


Fitzsimons, Lorna
Lepper, David


Flynn, Paul
Leslie, Christopher


Foster, Rt Hon Derek
Lewis, Ivan (Bury S)


Foster, Michael Jabez (Hastings)
Liddell, Mrs Helen


Foster, Michael John (Worcester)
Linton, Martin


Foulkes, George
Livingstone, Ken


Galbraith, Sam
Lloyd, Tony (Manchester C)


Galloway, George
Lock, David


Gapes, Mike
Love, Andrew


Gardiner, Barry
McAllion, John


George, Bruce (Walsall S)
McAvoy, Thomas






McCafferty, Ms Chris
Ruddock, Ms Joan


McCartney, lan (Makerfield)
Russell, Ms Christine (Chester)


McDonagh, Siobhain
Sawford, Phil


Macdonald, Calum
Sedgemore, Brian


McDonnell, John
Shaw, Jonathan


McGuire, Mrs Anne
Sheerman, Barry


McIsaac, Shona
Sheldon, Rt Hon Robert


Mackinlay, Andrew
Shipley, Ms Debra


McNulty, Tony
Short, Rt Hon Clare


MacShane, Denis
Simpson, Alan (Nottingham S)


Mactaggart, Fiona
Singh, Marsha


McWalter, Tony
Skinner, Dennis


Mahon, Mrs Alice
Smith, Rt Hon Andrew (Oxford E)


Mallaber, Judy
Smith, Angela (Basildon)


Mandelson, Peter
Smith, Rt Hon Chris (Islington S)


Marek, Dr John
Smith, Miss Geraldine (Morecambe & Lunesdale)


Marsden, Gordon (Blackpool S)



Marshall, David (Shettleston)
Smith, Jacqui (Redditch)


Marshall, Jim (Leicester S)
Smith, John (Glamorgan)


Marshall-Andrews, Robert
Smith, Llew (Blaenau Gwent)


Maxton, John
Snape, Peter


Meacher, Rt Hon Michael
Soley, Clive


Meale, Alan
Squire, Ms Rachel


Michie, Bill (Shef'ld Heeley)
Starkey, Dr Phyllis


Milburn, Alan
Steinberg, Gerry


Miller, Andrew
Stevenson, George


Mitchell, Austin
Stewart, David (Inverness E)


Moffatt, Laura
Stewart lan (Eccles)


Moonie, Dr Lewis
Stoate, Dr Howard


Morgan, Ms Julie (Cardiff N)
Stott, Roger


Morgan, Rhodri (Cardiff W)
Strang, Rt Hon Dr Gavin


Morley, Elliot
Stringer, Graham


Morris, Ms Estate (B'ham Yardley)
Stuart, Ms Gisela (Edgbaston)


Mountford, Kali
Sutcliffe, Gerry


Mudie, George
Taylor, Rt Hon Mrs Ann (Dewsbury)


Mullin, Chris



Murphy, Jim (Eastwood)
Talyor, Ms Dari (Stockton S)


Norris, Dan



O'Brien, Bill (Normanton)
Thomas Gareth (Clwyd W)


O'Hara, Edward
Timms, Stephen


Olner, Bill
Tipping, Paddy


O'Neill, Martin
Todd, Mark


Organ, Mrs Diana
Touhig, Don


Osborne, Mrs Sandra
Trickett, Jon


Pearson, lan
Truswell, Paul


Perham, Ms Linda
Turner, Dennis (Wolverh'ton SE)


Pickthall, Colin
Turner, Desmond (Kemptown)


Pike, Peter L
Twigg, Derek (Halton)


Plaskitt, James
Twigg, Stephen (Enfield)


Pollard, Kerry
Vaz, Keith


Pond, Chris
Vis, Dr Rudi


Pope, Greg
Walley, Ms Joan


Pound, Stephen
Ward, Ms Claire


Powell, Sir Raymond
Watts, David


Prentice, Ms Bridget (Lewisham E)
White, Brian


Prentice, Gordon (Pendle)
Whitehead, Dr Alan


Primarolo, Dawn
Wicks, Malcolm


Purchase, Ken
Williams, Rt Hon Alan (Swansea W)


Quin, Ms Joyce



Quinn, Lawrie (Scarborough)
Williams, Alan W (E Carmarthen)


Radice, Giles
Williams, Mrs Betty (Conwy)


Rapson, Syd
Wills, Michael


Raynsford, Nick
Winnick, David


Reed, Andrew (Loughborough)
Winterton, Ms Rosie (Doncaster C)


Reid, Dr John (Hamilton N)
Wise, Audrey


Robertson, Rt Hon George (Hamilton S)
Worthington, Tony



Wray, James


Roche, Mrs Barbara
Wright, Dr Tony (Cannock)


Rogers, Allan
Wright, Tony D (Gt Yarmouth)


Rooker, Jeff
Wyatt, Derek


Rooney, Terry



Ross, Ernie (Dundee W)
Tellers for the Ayes:


Rowlands, Ted
Mr. John McFall and


Roy, Frank
Mr. David Jamieson.





NOES


Ainsworth, Peter (E Surrey)
Hague, Rt Hon William


Allan, Richard (Shef'ld Hallam)
Hamilton, Rt Hon Sir Archie


Amess, David
Hammond, Philip


Ancram, Rt Hon Michael
Hancock, Mike


Arbuthnot, James
Harris, Dr Evan


Ashdown, Rt Hon Paddy
Harvey, Nick


Atkinson, Peter (Hexham)
Hawkins, Nick


Baker, Norman
Heath, David (Somerton & Frome)


Baldry, Tony
Heathcoat-Amory, Rt Hon David


Ballard, Mrs Jackie
Horam, John


Beggs, Roy (E Antrim)
Howard, Rt Hon Michael


Beith, Rt Hon A J
Howarth, Gerald (Aldershot)


Bercow, John
Hughes, Simon (Southwark N)


Blunt, Crispin
Hunter, Andrew


Body, Sir Richard
Jack, Rt Hon Michael


Boswell, Tim
Jackson, Robert (Wantage)


Bottomley, Peter (Worthing W)
Jenkin, Bernard (N Essex)


Bottomley, Rt Hon Mrs Virginia
Johnson Smith, Rt Hon Sir Geoffrey


Brady, Graham



Brand, Dr Peter
Jones, leuan Wyn (Ynys Môn)


Brazier, Julian
Jones, Nigel (Cheltenham)


Breed, Colin
Key, Robert


Brooke, Rt Hon Peter
King, Rt Hon Tom (Bridgwater)


Browning, Mrs Angela
Kirkbride, Miss Julie


Bruce, lan (S Dorset)
Kirkwood, Archy


Bruce, Malcolm (Gordon)
Laing, Mrs Eleanor


Burns, Simon
Leigh, Edward


Burstow, Paul
Letwin, Oliver


Butterfill, John
Lewis, Dr Julian (New Forest E)


Campbell, Menzies (NE Fife)
Lidington, David


Cash, William
Lilley, Rt Hon Peter


Chapman, Sir Sydney (Chipping Barnet)
Livsey, Richard



Lloyd, Rt Hon Sir Peter (Fareham)


Chidgey, David
Luff, Peter


Chope, Christopher
Lyell, Rt Hon Sir Nicholas


Clark, Rt Hon Alan (Kensington)
MacGregor, Rt Hon John


Clark, Dr Michael (Rayleigh)
MacKay, Andrew


Clarke, Rt Hon Kenneth (Rushcliffe)
Maclean, Rt Hon David



McLoughlin, Patrick


Clifton-Brown, Geoffrey
Malins, Humfrey


Collins, Tim
Maples, John


Colvin, Michael
Mates, Michael


Cormack, Sir Patrick
Mawhinney, Rt Hon Dr Brian


Cotter, Brian
May, Mrs Theresa


Cran, James
Merchant, Piers


Curry, Rt Hon David
Michie, Mrs Ray (Argyll & Bute)


Davey, Edward (Kingston)
Moore, Michael


Davis, Rt Hon David (Haltemprice)
Morgan, Alasdair (Galloway)


Davies, Quentin (Grantham)
Moss, Malcolm


Day, Stephen
Nicholls, Patrick


Dorrell, Rt Hon Stephen
Norman, Archie


Duncan, Alan
Öpik, Lembit


Duncan Smith, Iain
Ottaway, Richard


Evans, Nigel
Page, Richard


Faber, David
Paice, James


Fabricant, Michael
Paterson, Owen


Fallon, Michael
Prior, David


Fearn, Ronnie
Redwood, Rt Hon John


Flight, Howard
Rendel, David


Forth, Rt Hon Eric
Robathan, Andrew


Foster, Don (Bath)
Robertson, Laurence (Tewk'b'ry)


Fowler, Rt Hon Sir Norman
Roe, Mrs Marion (Broxbourne)


Fraser, Christopher
Ross, William (E Lond'y)


Gale, Roger
Rowe, Andrew (Faversham)


Garnier, Edward
Ruffley, David


Gibb, Nick
Russell, Bob (Colchester)


Gillan, Mrs Cheryl
St Aubyn, Nick


Gorman, Mrs Teresa
Sanders, Adrian


Gorrie, Donald
Sayeed, Jonathan


Gray, James
Shephard, Rt Hon Mrs Gillian


Green, Damian
Shepherd, Richard (Aldridge)


Greenway, John
Simpson, Keith (Mid-Norfolk)


Grieve, Dominic
Smith, Sir Robert (W Ab'd'ns)


Gummer, Rt Hon John
Soames, Nicholas






Spelman, Mrs Caroline
Trend, Michael


Spicer, Sir Michael
Tyler, Paul


Spring, Richard
Tyrie, Andrew


Stanley, Rt Hon Sir John
Viggers, Peter


Steen, Anthony
Wallace, James


Streeter, Gary
Walter, Robert


Stunell, Andrew
Wardle, Charles


Swayne, Desmond
Webb, Professor Steve


Swinney, John
Wells, Bowen


Syms, Robert
Welsh, Andrew


Tapsell, Sir Peter
Whitney, Sir Raymond



Whittingdale, John


Taylor, lan (Ester & Walton)
Widdecombe, Rt Hon Miss Ann


Taylor, John M (Solihull)
Willis, Phil


Taylor, Matthew (Truro)
Woodward, Shaun


Taylor, Sir Teddy
Yeo, Tim


Temple-Morris, Peter
Young, Rt Hon Sir George


Thompson, William



Tonge, Dr Jenny
Tellers for the Noes:


Townend, John
Mr. Nigel Waterson and


Tredinnick, David
Mr. Oliver Heald.

Question accordingly agreed to.

Clause 19 ordered to stand part of the Bill.

Bill (Clauses 1, 15, 17 and 19) reported, without amendment; to lie upon the Table.

DELEGATED LEGISLATION

Motion made, and Question put forthwith, pursuant to Standing Order No. 118(6) (Standing Committees on Delegated Legislation),

PUBLIC HEALTH

That the Food Protection (Emergency Prohibitions) (Paralytic Shellfish Poisoning) Order 1997 (S.I., 1997, No. 1565), dated 20th June 1997, a copy of which was laid before this House on 24th June, be approved.—[Mr. Robert Ainsworth.]

Question agreed to.

Motion made, and Question put forthwith, pursuant to Standing Order No. 118(6) (Standing Committees on Delegated Legislation),

MONOPOLIES AND MERGERS

That the draft Supply of Beer (Tied Estate) (Amendment) Order 1997, which was laid before this House on 26th June, be approved.—[Mr. Robert Ainsworth.]

Question agreed to.

Motion made, and Question put forthwith, pursuant to Standing Order No. 118(6) (Standing Committees on Delegated Legislation),

NORTHERN IRELAND

That the draft Further Education (Northern Ireland) Order 1997, which was laid before this House on 3rd July, be approved.—[Mr. Robert Ainsworth.]

PUBLIC ADMINISTRATION

Ordered,
That Mr. Peter Bradley, Mr. Ronnie Campbell, Dr. Lynda Clark, Mr. Mike Hancock, Miss Melanie Johnson, Mr. Fraser Kemp, Fiona Mactaggart, Mr. Rhodri Morgan, Mr. David Ruffley, Mr. Richard Shepherd and Mr. Andrew Tyrie be members of the Select Committee on Public Administration.—[Mr. Robert Ainsworth.]

Mr. Deputy Speaker (Mr. Michael Lord): With the leave of the House, we shall take the next three motions together.

FOREIGN AFFAIRS

Ordered,
That Ms Diane Abbott, Mr. Donald Anderson, Mrs. Virginia Bottomley, Sir Peter Emery, Mr. Norman A. Godman, Mr. David Heath, Mr. Eric Illsley, Mr. Andrew Mackinlay, Mr. Ernie Ross, Mr. Ted Rowlands, Sir John Stanley and Mr. David Wilshire be members of the Foreign Affairs Committee.—[Charlotte Atkins, on behalf of the Committee of Selection.]

HOME AFFAIRS

Ordered,
That Mr. Richard Allan, Mr. Robin Corbett, Mr. Ross Cranston, Mr. Douglas Hogg, Mr. Gerald Howarth, Ms Beverley Hughes, Mr. Martin Linton, Mr. Humfrey Malins, Mr. Chris Mullin, Mr. Marsha Singh and Mr. David Winnick be members of the Home Affairs Committee.—[Charlotte Atkins, on behalf of the Committee of Selection.]

TREASURY

Ordered,
That Mrs. Liz Blackman, Mr. Malcolm Bruce, Mr. Charles Clarke, Mr. Tony Colman, Mr. Jim Cousins, Mr. Quentin Davies, Ms Ruth Kelly, Sir Peter Lloyd, Mr. Giles Radice, Mr. Brian Sedgemore, Sir Michael Spicer and Sir Teddy Taylor be members of the Treasury Committee.—[Charlotte Atkins, on behalf of the Committee of Selection.]

Orders of the Day — Prisons (Drug and Alcohol Abuse)

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Robert Ainsworth.]

Mr. Humfrey Malins: I am glad to have the opportunity—[Interruption.]

Mr. Deputy Speaker (Mr. Michael Lord): Order. The hon. Member may like to wait a moment. Will hon. Members leave the Chamber as quickly and as quietly as possible?

Mr. Malins: I am glad to have the opportunity to raise the important matter of drug and alcohol abuse in prisons. The problem gets worse by the day, and may reach crisis level unless urgent action is taken.
I shall make two preliminary points. First, I declare an interest as a practising solicitor in the field of crime for many years, a former acting metropolitan stipendiary magistrate, and a recorder of the Crown court. Secondly, I shall not seek to score party political points. The problem that faces this Government was faced by the Conservative Government. As with many other issues, it would benefit from an all-party approach by hon. Members who wish to be constructive and who have some knowledge of and an interest in this subject.
The problem of drug and alcohol abuse in prisons is much more acute than the public realise.
Let us go back a little in the offenders cycle and understand that drug and alcohol abuse is a major contributor to criminal offending. Some 50 per cent. of property crimes in this country are related to substance misuse. Most burglars who appear before me have taken the goods simply to sell them to raise the money to fund their drug habit, some of them needing as much as £500 a week. More than half the criminal cases in London's magistrates courts are drink or drug-related, and 20 per cent. of people who are arrested in police stations test positive for drugs.
A defendant who is addicted to drugs or alcohol may be sent to prison. What next? Incredibly, his problem may get even worse. There are more than 130 prisons, and 150,000 people pass through our prison system each year. Some 25 per cent. of receptions are on drugs at the point at which they enter the prison system. Drug use and distribution in prison can and often do become the focus of daily activity, filling the vacuum left by the regrettable absence of work and education opportunities.
Are drugs of all sorts and alcohol freely available in prison? In a written reply on 14 July, the Minister told me that, in the year 1996–97, some 21,700 mandatory drug test samples were positive. That figure includes results from both random and targeted tests that led to 16,757 adjudications for misuse of controlled drugs. Information on the number of instances of alcohol consumption was not available, but, anecdotally, I hear that it is very high.
How do these substances get into our prison system, and what should we do about it? There are perhaps four main ways. First, they enter through social visits by the friends and families of prisoners who are allowed contact visits, who I understand are not intimately searched.

Secondly, prisoners themselves can and do bring drugs back into prison after collecting them on some outside trip, perhaps to court for a remand or on a hospital visit.
Thirdly, there are clearly some breaches of the perimeter walls of our prisons, and drugs are occasionally thrown over them to be collected at a preordained point. Fourthly—one is reluctant to say this, because by and large our prison staff are dedicated and excellent—it is likely that in the system there are some corrupt staff and, indeed, some corrupt professional visitors—lawyers and the like—who abuse their preferential access by bringing in drugs.
I recently asked the Minister whether he would make it his policy to see that prison officers, before they came on duty, were subject to the same search policy as that which applies to visitors. The answer was no. I was told that professional visitors, including prison officers, would be subject to a modified search, while general visitors would continue to be subject to a full rub-search procedure. That follows the Prison Service assessment that, although there are exceptions, professional visitors and staff generally pose a lower risk.
It may not be possible to eliminate these substances entirely in prisons, and perhaps I am naive in hoping that we might. Let us not forget that more than 1,300 visitors were arrested trying to smuggle illicit drugs into prisons in the past year. The Minister should consider the introduction of even more draconian measures to make the problem of getting drugs and alcohol into prisons, which is fairly easy at the moment, nearly impossible in times ahead.
I have four suggestions for the Minister, which may help. First, prison officers, all professional visitors and all prison staff could, and perhaps should, be subject to a full rub-down search on entering a prison. Secondly, any prisoner who tests positive after a mandatory drugs test should receive only non-contact visits for the remainder of his or her sentence.
Thirdly, any such prisoner should also receive a substantial loss of remission of sentence. Fourthly, in addition to any other penalty, any visitor who is caught attempting to smuggle drugs or alcohol into prison should not be entitled to a further visit to that prison or the prisoner during the remainder of the prisoner's sentence.
Many of those in prison who are addicted to alcohol or drugs cry out for help, and it is that area on which I shall now concentrate. Alcoholism and drug dependency are arguably illnesses which can never be cured. However, I am convinced that substantial investment to help to get addicts off drink or drugs is money well spent. It will ultimately save this country's criminal justice system and people much money and personal anguish.
I am not sure that much has been done until relatively recently. For many years, I have visited and talked to dozens, possibly hundreds, of prisoners throughout the south-east. Many have been addicts. They have all known that drugs and alcohol were freely available. I have always asked, "What is done here in this prison to help people who wish to be helped to get rid of the habit?", and all too often I have received the reply, "Not very much."
I recently visited Coldingley prison in the constituency of my hon. Friend the Member for Surrey Heath (Mr. Hawkins), where I learned more about the outstanding work of RAPT—the Rehabilitation of Addicted Prisoners Trust. My hon. Friend the Member


for Westbury (Mr. Faber) is a trustee of that outstanding organisation, and I commend him for his work and interest.
RAPT recognises that the majority of inmates continue to use drugs while in prison, and that some will develop the habit for the first time during their stay. It knows, as we know, that the use of drugs in prisons causes problems of violence, disorder and intimidation as well as the spread of infection. It points out that the average cost to the taxpayer of keeping someone in prison is nearly £24,000 a year, and that, unless the addict's problem is confronted and treated in prison, he is almost certain to return to uncontrolled drug use and crime on release. Time in prison is an ideal time to break the vicious cycle of drug abuse, crime and imprisonment.
RAPT is a charity offering treatment to alcoholics and drug addicts in prison. It was established under the name of the Addictive Diseases Trust in 1991, opening its first treatment unit in Downview prison a year later. Its aim is to help prisoners to recover from addiction while serving a prison sentence, and its programmes are based on the principle of 12-step recovery, which was first applied in prisons in the United States, but was extensively modified to fit the requirements of our system.
RAPT uses trained counsellors, many of whom are recovered addicts, some with experience of prison life. It has intensive and abstinence-based programmes. It does not offer a soft option. It is a tough course, but it is successful.
Early evaluation results have shown that more than 50 per cent. of those received on to RAPT's programmes, which are established in a number of prisons, progressed to graduation, usually after 10 to 12 weeks. Among those graduates, relapse into drug misuse and reoffending is rare. I was privileged to meet former prisoners who have successfully completed the programme and are voluntarily helping others to help to recover their self-esteem. One prisoner said:
Before coming on the programme, I had used drugs almost every day for the previous 19 years of my life sentence. It is still astounding to me that I had to come to prison to find my freedom. I have not had a drug or a drink for three years, and I am still inside. It's a miracle.
The RAPT programme has been praised by many people in positions of authority, and I commend it and its like to the Government.
Therefore, my message to the Government is this. Let us all strive to prevent the circulation of drink and drugs in prison: first understand the scale of the problem; next, continue the previous Government's anti-drug strategy, which has had some success and which I commend in many ways; continue the mandatory drug testing scheme, despite its problems, which we know about; increase the resources available for drug treatment programmes in the prison system; give prisoners real incentives to take advantage of treatment options; consider whether the programme so successfully undertaken by RAPT can be further encouraged and extended; improve after-prison care.
In the face of what I believe the whole House would acknowledge to be a serious problem, the Government and the Minister will need to be tough but sensitive, and, above all, thoughtful. If he is, he will have the support of the whole House.

The Parliamentary Under-Secretary of State for the Home Department (Mr. George Howarth): I am grateful to the hon. Member for Woking (Mr. Malins) for raising what I agree is an important and pressing issue. I am grateful to him for continuing the bipartisan approach that we adopted when in opposition. The hon. Gentleman was kind enough to brief me on the issues that he intended to raise, which has given me the opportunity to make a better-informed response. He made a thoughtful and constructive speech, and paid generous tribute to a number of organisations and individuals, which was helpful.
I welcome the opportunity to outline the Prison Service initiatives to reduce the supply of drugs and alcohol into prisons, to deter prisoners from misusing drugs and to provide treatment for substance misusers, from whatever source the abuse arises.
The hon. Gentleman will be aware that the Prisons (Alcohol Testing) Act was enacted in March this year. The Prison Service is currently considering the potential costs of implementing a pilot programme of mandatory alcohol testing. It is not intended that testing for alcohol will operate on the same scale as mandatory drug testing. That is not because we do not think that it is a serious problem, but it is likely to be undertaken mainly on suspicion, with the possibility of random testing under certain circumstances—perhaps where there is a known arid particular problem of alcohol misuse among prisoners released on temporary licence.
The issue about which the hon. Gentleman expressed the greatest concern was stopping the smuggling of drugs through prison visits and other means. Between 1 March 1996 and 28 February 1997, there were 2,183 incidents involving drugs in prison in which the means by which the drugs entered the prison could be determined. In 80 per cent. of those incidents, the drugs were found on visitors to prisoners. In other cases, they were brought in by prisoners or thrown over the perimeter, to be picked up at a prearranged time and place.
A great deal of energy has been devoted to improving the supervision of visits. Improvements have included the use of passive sniffer dogs—I have seen them in some establishments—which are trained to sit in front of a person carrying the drugs, blocking their way. There are clear notices at entrances and in other parts of the prison, setting out the consequences if people are intercepted and prosecuted for carrying drugs. On Thursday, I visited Feltham young offenders institute and saw how effective and clear the notices are. No one is left in any doubt that the police will be brought in and firm and swift action taken.
Other improvements include the use of locker rooms to minimise the belongings that visitors may carry into the visits. Another initiative is the use of low tables and fixed seating to make the passing of drugs more difficult. It requires a little imagination, but not much, to realise how effective that can be in certain circumstances.
Closed circuit television operates in a number of areas, as I saw in many institutions. I have seen the evidence that shows visitors passing drugs. It is often the least likely visitor who passes drugs to a family member or other prisoner he or she is visiting. The use of closed or non-contact visits for those found guilty of a drugs offence is another initiative used in some circumstances.


A pilot programme of mandatory closed and non-contact visits for any prisoner found to have misused drugs is being carefully evaluated. We are certainly prepared to consider such measures.
Most important, there has been enhanced use of intelligence about prisoners and their visitors to intercept drugs that are intended for prisoners and to detect drugs that are already in prisons.
The Prison Service must consider the competing needs of security, reducing drug supply and enabling prisoners to maintain reasonable contact with family and friends, which is a difficult balance to strike. The drugs problem could be eradicated if we eliminated all contact between prisoners and the world outside their cells. Although the hon. Member for Woking said that we may need more draconian measures, I do not think that he would think that such action would be desirable in all circumstances. We must specifically take into account the difficulties of prisoners with children who visit.
The Prison Service is in the business of assessing and managing risk, best to target available resources to the source of the greatest threat. That is the sensible way in which to deal with the problem. Governors are well aware of the possibility of drugs being thrown over perimeter walls and are under clear instructions to ensure that, as far as possible, local searching strategies deal with the possibility.
After some well-publicised incidents in the past few years, and as part of wider measures to improve security, search procedures for prisoners and visitors have improved. Particular attention is being paid to searching prisoners returning from temporary release, because that is one obvious route for drugs into prisons.
The hon. Member mentioned rub-down searches. Generally, such searches are not conducted every time a visitor enters any prison, although they are carried out in category A prisons. Visitors to prisoners are given a full rub-down search that involves a visual check of the ears, nose, mouth, hair and shoes. Professional visitors—including probation officers and lawyers and staff—from whom there is thought to be a lesser risk do not have ears, nose, mouth, hair or shoes searched.
It is self-evident that there is a greater risk of smuggling from visitors to prisoners. Under pressure from a spouse or son, many visitors will be under enormous pressure to smuggle drugs into prison, particularly if they believe that it will make life easier for their loved ones. I realise that other types of pressure can be brought to bear—such as, for example, if groups target friends or relatives outside prisons. At non-category A prisons, the level of searching is decided by the governor, depending on the risk and the category of prison. By no means will all visitors always be subject to a full rub-down search.
The hon. Member for Woking mentioned intimate searching—by which I assume that he means searching of body orifices. Such searches of visitors by prison staff is unlawful. Strip-searching of visitors is permitted, but only on the basis of reasonable cause—which the hon. Gentleman, as a lawyer, will understand. Governors are empowered to refuse visits by close relatives and others on the grounds of security, good order and discipline, or in the interests of prevention or discouragement of crime.
The hon. Member paid proper respect to those who work in the Prison Service, but felt that perhaps attention should be paid particularly to prison officers as a source

of drugs in prison. The difficulty with such an argument is that there is not a great deal of evidence to support it. Centrally held records kept over the past four years show that no members of staff have been disciplined for involvement in drug supply in prisons.
In six cases, staff have either been dismissed or resigned because of drugs-related behaviour, but that behaviour occurred away from the prison. Seven staff members have been disciplined for bringing alcohol into prison without authority. Of those, two were dismissed and four resigned before the matter could be brought to a conclusion. Nevertheless, it is impossible to deny with absolute certainty that drug smuggling by staff occurs. The available evidence, however, does not suggest that it is a significant problem. If the hon. Gentleman has any evidence, or is aware of any evidence, that would take us further, I should of course be glad to receive it. The Prison Service certainly takes a most serious view of any staff involved in such activities, and the police would become involved in those circumstances.
I must say a few words about mandatory drug testing. When it was introduced, I was the Opposition spokesman with the relevant responsibility. The Labour party gave its full support to what has been an important innovation. Mandatory drug testing provides, among other things, a clearer picture of the levels of and trends in drug misuse in prison, which assists in the targeting of treatment resources and provides an indicator of where drug strategies are having success and where they need greater impetus. It is also important to send a clear message to inmates that drug misuse in prisons will not be tolerated. We must reinforce that message time and again.
In 1996–97, approximately a quarter of random mandatory drug tests proved positive, the vast majority being for cannabis. There is widespread concern, which the Government share, about the perverse incentive to switch from cannabis to more harmful drugs such as opiates which are detectable for a shorter time in a urine sample because they stay in the bloodstream for a shorter time.
The average figures for the estate as a whole conceal a great deal of variation in individual prisons. More work needs to be done on that. The Prison Service aims to learn from prisons with low levels of drug misuse and to apply successful initiatives in other establishments.
An option open to prisons under the mandatory drug testing programme is to test prisoners at random on reception. Some 550 prisoners were tested on reception in 1996–97, far fewer than under the random testing programme. Nevertheless, the percentage of samples proving positive on reception was 10 per cent. higher than in random tests across the whole prison population. That might tell us something. It suggests that imprisonment does not necessarily worsen drug misuse—perhaps even the reverse.
Research into mandatory drug testing effectiveness has been undertaken, most notably that commissioned by Oxford university and the National Addiction Centre. The Oxford research into attitudes to mandatory drug testing and wider drug misuse is being conducted at five establishments. I shall perhaps say more about that later.
A first phase of interviews was undertaken between February 1996 and April 1997. The researchers are now making return visits to the five establishments to gauge changes in attitudes and perceptions over time. The initial


findings are that mandatory drug testing is only partly successful in deterring prisoners from misusing drugs or causing them to cut down. We need to gather more evidence, and I am not sure that we have a precise picture of what is going on. I certainly mean to keep the data under review to make sure that we get things right and that we are properly informed about what action needs to be taken. The hon. Member for Woking also mentioned treatment in prisons, which we consider very important.
The Prison Service strategy cannot be about ever-tighter controls alone, although they are important. It must recognise that we need measures to reduce demand and minimise the risks to the health and bodies of individual misusers and, in the longer term, of the public.
All prisons have for some time provided detoxification, education and counselling to prisoners with substance misuse problems via the health care centre, the probation department or community drug agencies. Many have gone further, providing, for example, rehabilitation units or drug-free areas supported by voluntary testing. These are important sources of help.
Some 59 prisons are now involved in treatment. The additional cost this year is more than £6 million. Resources are being earmarked, and work is extending throughout the prison population. There are several variations, including therapeutic communities and community-linked through-care programmes. We attach great significance to all of them.
The hon. Gentleman mentioned RAPT. I acknowledge the good work that it does, not just at Coldingley, but at Downview, Pentonville, Wandsworth and Norwich prisons. I had an opportunity to visit the programme in its early days at Downview. It is an impressive and effective way to deal with the difficulties.
That is just one of the many community drug agencies that the Prison Service is working with in a proper partnership approach. We aim to break the vicious circle of drug misuse, crime and imprisonment. All those agencies—and perhaps some others that we are not yet using—have a valuable contribution to make.
The ultimate objective is for all drug misusers in prison to have access to appropriate and cost-effective treatment. We had a manifesto commitment to introduce voluntary testing units so that all prisoners who feel able to do so can prove that they are drug-free. That could be an important contribution to help bring the problem under control. Officials are working on the practicalities. I expect to receive advice in the autumn, when we hope to bring the plans forward.
The drugs strategy is multi-disciplinary and multi-agency. We intend to keep it that way. I have met many of the staff involved, who play an important role in drug education, counselling and bringing together agencies and other resources to deal with the problems. We should congratulate them.
It is important that the strategy involves not just security and health care, but probation officers, psychologists and, when appropriate, the chaplaincy. It also relies heavily on drug workers from outside community agencies. I do not claim that improvements cannot be made, because they can, but there is a balance to be struck. The hon. Gentleman mentioned the necessary elements of that balance. I shall consider that over the next few months. We take the problem seriously and hope to get to grips with resolving it. It is important that people are rehabilitated while they are in prison, not exposed to more drug problems.

Question put and agreed to.

Adjourned accordingly at fourteen minutes to Eleven o'clock.